Paladin Energy and Boss Energy still top ASX uranium picks, but few catalysts for uranium surge in 2025 —UBS
What’s in store for the uranium market in 2025 and which ASX uranium stocks are oversold at current levels.
The uranium market, long championed by some as a critical pillar of the global clean energy transition, is struggling to generate near-term momentum. According to a new research note from major broker UBS, the 2024 uranium price pullback – down roughly 22% year-to-date – may not be a mere blip, but a prelude to continued subdued conditions heading into 2025.
Although the broader story of uranium as a strategic energy resource remains intact, UBS’s revised uranium price forecasts indicate a more cautious near-term stance than previously anticipated. Still, there are still two ASX-listed uranium stocks that remain on the broker’s shopping list in Paladin Energy (ASX: PDN) and Boss Energy (ASX: BOE). Let’s check out UBS’s latest uranium market musings.
UBS’s 2025 uranium outlook
UBS had been among a cohort of several major investment banks that predicted a strong performance in the uranium price in 2024. To be fair, as the chart of the uranium price since the beginning of the COVID-19 pandemic in 2020 shows, things were looking very good for the uranium price up until around February this year.
Since then, there’s been a steady decline in the uranium price, with the front-month uranium futures contract on COMEX trading around 30% below its 2024 high around US$110/lb.
UBS blames the rally through 2023 and recent optimism on growing interest in nuclear energy as a key component of the long term clean energy transition. Unfortunately, this optimism hasn't translated into a higher uranium price in 2024, as UBS notes “buyers remain on the sidelines and still without urgency to procure near-term”.
As for market dynamics, the broker’s views can be summarised as follows:
- COP 29 nuclear outcomes were incremental rather than structural for the global nuclear industry versus COP 28.
- Near-synchronous announcements by Meta Platforms, Amazon, Microsoft and Google that they would invest in nuclear-backed solutions for their AI-related energy requirements provided a “boost to sentiment”, but have questionable near-term demand impacts.
- Global nuclear reactor growth would drive a 3.4% increase in uranium consumption in 2025, led by China and India.
- Global uranium supply on the other hand, would likely grow by 6-7% as the world’s largest producer Kazakhstan’s Kazatomprom leading the charge. It’s aiming to lift volumes by around 12% to roughly 25,000-26,500 metric tonnes of uranium, while additional production from junior players such as PDN and BOE will also nudge supply higher.
Supply appears poised to outpace demand in 2025, and as a result, UBS has trimmed its 2025 and 2026 uranium price forecasts by around 9% and 6% to US$78/lb and US$80/lb respectively.
But there are several key dynamics that “deserve continued focus into next year” the broker notes, which could trigger a reassessment of the uranium outlook. These include:
- U.S. demand outlook under Trump's presidency
- Continued supply risks around Niger due to the unstable political situation in the country (Niger accounts for approximately 4% of global production)
- Ongoing impacts of the Russia-USA enriched uranium trade war
- Canada’s Nexgen Energy (ASX: NXG) emerging contracting activity and its impact on broader sentiment (NXG is on track to become one of the worlds top producers when its Rook I Project comes online in 2029)
This means tweaks for ASX uranium stocks
In tandem with its commodity-level shifts, UBS has reassessed its earnings forecasts and price targets for the two leading Australian uranium producers, Paladin Energy and Boss Energy. Both have copped EPS downgrades as a result of the UBS's softened uranium price outlook.
Paladin Energy (ASX: PDN)
Rating: BUY | Price Target: $9.90
UBS has cut FY25 and FY26 earnings estimates by 30% and 10%, respectively, due to brokers’ lowered uranium price assumptions and other variables. PDN’s price target loses about 5% to $9.90 per share (from $10.40).
Still, UBS remains positive on PDN, suggesting its steep share price decline – some 55% from 2024 peaks – is overdone. The broker believes that water management issues at the company’s Langer Heinrich Mine (“LHM”) in Namibia appear to be easing, with negative impacts on production likely to be contained to FY25.
Recent meetings with PDN’s management provided UBS with greater confidence in both the LHM turnaround and the ongoing bid for Canadian-listed Fission Uranium Corp. (TSX: FCU). “We see downside risk as limited at these levels”, suggests UBS.
Boss Energy (ASX: BOE)
Rating: BUY | Price Target: $3.40
BOE’s earnings forecasts also received a trim. UBS downgraded the company’s FY25 earnings by 17% and its FY26 earnings by 6%. This translates to a 3% cut to the brokers price target, now at $3.40 per share (from $3.50).
UBS notes that BOE’s ramp-up progress at its Honeymoon project has been smoother than Paladin’s LHM re-start, but also that it’s still in the early ramp-up phase. A key indicator to watch will be BOE’s updated cost guidance, expected in the fourth quarter update due at the end of next month.
UBS’s recent discussions with Boss’s new chief operating officer, Matt Dusci, were also supportive of the view the company is on a constructive trajectory despite short-term earnings headwinds.
Conclusion
UBS’s latest research report on the uranium market and ASX uranium stocks confirms the uranium sector is at a crossroads. While the medium- to long-term narrative remains supportive – anchored by expanding reactor fleets and a slow but steady global shift toward nuclear energy – current supply-demand dynamics are not conducive to the rapid uranium price appreciation witnessed during and immediately after the pandemic.
The broker still prefers PDN and BOE in the ASX-listed uranium sector, rating both as a BUY. At the time of writing, PDN's last price is $7.53 and BOE's last price is $2.46. This means that PDN has 31.5% upside to UBS's price target of $9.90 and BOE has 38.2% upside to UBS's price target of $3.40. Both price targets were trimmed, however.
UBS’s recalibrated forecasts serve as a reminder that investors need to remain vigilant and discerning when considering stocks that are exposed to the commodity price cycle.
This article first appeared on Market Index on Monday 16 December 2024.
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Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl has a passion for technical analysis and has taught his unique brand of price-action trend following to thousands of Aussie investors.
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Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl...
Carl has over 30-years investing experience and has helped investors navigate several bull and bear markets over this time. He is a well respected markets commentator who specialises in how the global macro impacts Australian and US equities. Carl...
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