On Monday, Citi initiated coverage on Yellow (OTC:YELLQ) Cake Plc (YCA:LN) (OTC: YLLXF) stock, a company that offers investors exposure to physical uranium, with a Buy rating and a price target of £7.50. Citi highlighted Yellow Cake (LON:YCA)'s doubling of uranium holdings since 2019 and anticipates a further 50% increase over the next five years.
The firm noted the attractiveness of Yellow Cake due to its low operating costs and potential for volume growth. The positive outlook for uranium prices is supported by the growing nuclear energy sector, while the supply has not kept up with the increasing demand. According to Citi's house view, uranium prices are expected to rise to $110 per pound by 2025/26.
Citi's coverage comes with the perspective that Yellow Cake serves as a unique vehicle for investors, similar to an exchange-traded fund (ETF), to invest in physical uranium. The firm's bullish stance on the company is based on the expectation of continued growth in the uranium market, driven by the nuclear energy thematic.
While Citi has expressed a preference for uranium exposure through the pure-play upstream miner Kazatomprom (LON:KAPq), citing the potential for higher earnings and benefits from positive operating leverage, the firm still recognizes Yellow Cake as a solid choice for investors looking to gain exposure to the uranium sector.
The initiation of coverage by Citi with a Buy rating and a £7.50 price target reflects confidence in Yellow Cake's business model and its ability to capitalize on the favorable dynamics within the uranium market.
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