Quelle: Citi Research, Haver
Uranium mining company Uranium Energy Corp (UEC) is digging all the love it’s getting from the market right now. But after we mined into company documents, we couldn’t resist humming the cowboy song, “You Done Tore Out My Heart and Stomped That Sucker Flat.”
Uranium Energy looks ready to do just that to investors.
The company has not responded to TheStreetSweeper’s request for comment but investors may find other viewpoints here. Meanwhile, we’ve leaned on some ol’ country songs to help us croon out the risks.
*”If The Jukebox Took Teardrops,” Or Market’s Feeling The Pain
While UEC stock is up, the company’s peers are all down.
(Source: Yahoo Finance)
The reason the sector’s performance remains so terrible is because uranium spot prices of about $36 are at a five-year low, as shown below.
(Source: Bloomberg)
So these factors indicate that UEC’s recent price performance is unsustainable because the fundamentals of the company (more on that below) and the sector have not improved. We expect the stock will collapse as it follows the path set by peers.
*UEC is “Busted”
UEC reports zero sales in the past seven quarters from its sole producer, the Palangana Mine.
UEC and other uranium companies were hurt after the Fukushima nuclear disaster hit in March 2011. Public pressure mounted and the negative effects have lingered and lower oil and gas prices have made the situation worse as of late for uranium companies. During its spotty history, UEC generated “no revenues from the sale of U3O8 generated during Fiscal 2014 or prior to Fiscal 2012.”
No surprise, then, that UEC shareholders have endured a long history of horrid earnings:
(Source: Bloomberg)
*”Baby, That Dog Won’t Hunt,” And UEC Won’t Produce
So the company is not even operating, as shown here.
The reason UEC was able to boost its cash recently is simply because it sold $3 million worth of uranium held in inventory.
The company sold 80,000 pounds of finished uranium. But they blew almost the entire wad. The excerpt from SEC filings, here, shows that only 4,000 pounds remain in inventory.
“… finished goods inventory balance of 84,000 pounds of U3O8 remaining as of April 30, 2015. Subsequent to April 30, 2015, the Company sold 80,000 pounds of finished goods-uranium concentrates from inventory generating gross sales of $3,080,000.”
So, while the $3 million sale helped, the party’s over. Even if the company sold every last remaining ounce at $38 per pound (2 bucks above today’s price), it would mean only about $152,000 to UEC.
That’s nothing, especially to a company that is sitting on its last few bucks and currently has no way to generate revenue.
*”Kick The Dust Up,” And The Hype, Too!
UEC has been running up on promotions coming from Twitter, Seeking Alpha authors and reportedly hype paid by the company itself.
Here is an example of a bullish tweet:
Here is one Seeking Alpha author’s bullish headline: “Uranium Energy Corp. Will Ride The Uranium Bull.”
Though we prefer this SA article: “Uranium Energy Overvalued Even At $2 – Better Choices For Speculating On Uranium Abound.”
And here is the hotstocked.com piece, titled: “And the Pump Initiator is … ShazamStocks Powered by Uranium Energy Corp.”
Additionally, insider buying has served as a promotional tool. But investors shouldn’t be thrown off by the CEO, who earns $640,000, making a small 34,000-share stock purchase. We contend it’s window dressing …. A little more come hither.
*Conclusion: “There’s A Tear In My Beer”
With no uranium production, UEC stock has rallied due to the inventory sale, some Japanese nuclear restart news and the small insider purchase – despite the fundamental shift in the uranium industry.
UEC has always lost money, has significant negative cash flow, has yet to achieve profitability and is struggling to operate as a going concern.
It really all comes down to this: The company is poor - down to about $6 million working capital as it burns about $4 million per quarter even in its current non-productive condition.
We expect UEC would have to see if and when uranium prices reach $45 to $50 per pound before it could justify restarting operations. In that event, an analyst estimates it would take two quarters and another $10 million or so per quarter simply to prep the mine.
So, a dilutive stock offering is just about the only thing left to prop up this company - and it’s sure to leave investors singing, “I’ve Got Tears In My Ears From Lying On My Back Cryin’ Over You.”
We expect the stock price to drop by more than a buck, down to $1.50.
* Important Disclosure: The owners of TheStreetSweeper hold a short position in UEC and stand to profit on any future declines in the stock price.
Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to editor@thestreetsweeper.org or scolberg@thestreetsweeper.org..
Quelle: bigcharts.com