Ideal Price to Buy Energy Fuels as the Rare Earth Rally Climbs Higher
Energy Fuels produces rare earths and uranium, is the stock about to move even higher?
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As the rare earth rally keeps rolling along, investors are clamoring for a piece of the action.
On Tuesday, we explored one of the hottest names in the sector, U.S.-based rare earth producer MP Materials (MP) . That stock is up by an incredible 501% so far this year.
Today, we’ll take a closer look at another name in the rare earths sector, Lakewood, Colorado-based Energy Fuels (UUUU) . Energy Fuels shot 10% higher on Tuesday, and closed at a multi-year high. The company mines and processes rare earths and other critical minerals, and is currently the largest U.S. producer of uranium.
The price of uranium has climbed from $63 to $79 per pound since March, but is well off its January 2024 highs of near $106 per pound. Uranium prices have been trending steadily higher since early 2021, as demonstrated on the weekly chart below.
With the need for energy rising sharply due to the anticipated proliferation of AI data centers, demand for nuclear power is on the rise. Our top pick in the nuclear sector, Oklo Inc. (OKLO) , closed at an all-time high on Tuesday. You can check out our latest analysis of Oklo here.
Uranium is a key component used in the production of nuclear energy, so that sharp increase in demand is good news for Energy Fuels. With challenges in bringing new production online, along with shortfalls from existing mines, the supply of uranium could fall behind the burgeoning demand for the radioactive chemical element.
In addition to uranium, Energy Fuels is also a player in the rare earths sector. The company owns and operates the White Mesa Mill in southeastern Utah. That facility was originally a uranium mine, but it also processes rare earth elements from heavy mineral sand projects.
How to Play Energy Fuels
It can be difficult to buy a stock when it's trading at multi-year highs, especially one that has climbed 361% year to date. Despite this, buyers can initiate a small position in Energy Fuels at current levels, and look to add shares on a pullback.
If a pullback should occur, the ideal price to add shares of Energy Fuels is near $20. That price coincides with the 38.2% Fibonacci retracement of the August 20, October 14 rally (upper red line).
The Bottom Line
U.S. energy demand is expected to increase by 25% by the end of this decade, according to ICF. Meanwhile, demand for rare earth elements is exploding. Energy Fuels is in position to benefit from both of these trends, making it a compelling name to own in the current market environment.
At the time of publication, Ponsi was long MP, OKLO and UUUU.
