Nuclear power is a hot topic at the moment and if you want some exposure to the industry then you could look at the ASX 200 uranium stock.
Especially after analysts at Bell Potter labelled this uranium producer as 'incredibly cheap'.
Which ASX 200 uranium stock?
The stock in question is Boss Energy Ltd (ASX: BOE).
It is focused on the re-start of the Honeymoon Uranium Project in South Australia. Management notes that Honeymoon represents one of the few uranium projects globally that is ready to come on-stream in the early stages of the emerging uranium bull market.
Bell Potter highlights that short sellers have been taking aim at the company. However, rather than being scared by this, the broker thinks that there's potential for a short squeeze to occur. Particularly given how short interest is the equivalent of 12.9 days' worth of trading volume and its cheap valuation. It explains:
BOE is currently the second most shorted stock on the ASX with short interest accounting for ~14.4% of shares outstanding, with a days-to-cover ratio of 12.9. With the stock down 22% over the last month alone, (uranium price is down 1.8%), investors continuing to hold short positions at this level run the risk of being squeezed in our opinion. At the current price of $2.51/sh, BOE implies a US$70/lb uranium price to perpetuity at an average LOM C1 cost of A$43/lb and AISC A$57/lb (US$30/lb and $40/lb respectively).
Under a scenario where uranium prices hold US$70/lb BOE's AISC margin of US$30/lb (43%) implies a rough EV/EBITDA multiple of 6.7x on a blended forward basis in FY26, which still screens incredibly cheap against North American peers (CCO/CCJ 12.9x, EU 9.6x, EFR 13.1x). In summary, short positions at this level need to be absolutely certain that BOE will disappoint on costs (BPe FY25 A$63/lb) or production (BPe FY25 850klbs) at its Jan-25 update. We see the potential for a pairs trade at this level given the recent outperformance of North American peers, with a likely unwinding in BOE shorts post the Jan-25 cost update.
Time to buy
According to the note, the broker has retained its buy rating with a reduced price target of $4.70 (from $5.70).
Based on its current share price of $2.51, this implies potential upside of 87% for investors over the next 12 months.
To put that into context, a $5,000 investment in this ASX 200 uranium stock would turn into approximately $9,350 if Bell Potter is on the money with its recommendation. It concludes:
We have applied a very conservative approach to our cost estimate, which sees a reduction in EPS of 68% in FY25, 14% in FY26 and 11% in FY27 and a reduction in our TP to $4.70 (previously $5.70). The purpose of this was to highlight the attractiveness of BOE at current prices under a scorched earth scenario. We see our earnings as having upside risk and maintain our Buy recommendation.
