Even Cameco Corp., the biggest player in the uranium industry, cannot escape recent weaknesses in the mineral's spot price.
Fraser Phillips, analyst with RBC Capital Markets, has downgraded Cameco to Sector Perform with above average risk from Outperform while lowering his price target to $32 from $35, citing declining uranium prices.
Since the beginning of the year, uranium spot prices have dropped $4 a pound, approacing the $40/lb low-water mark of the past four years.
"Notwithstanding the benefits of Cameco's uranium contract portfolio, we forecast a drop in EPS from $1.49 in 2009 to $1.16 in 2010, and only a modest increase to $1.20 in 2011 based on our revised uranium price forecasts," he said in a new note to clients.
For 2010, Mr. Phillips has dropped his estimated price to $44.50/lb from $50/lb. And for 2011, he now estimates the going rate of uranium to be $55/lb, down from $60/lb.
Continuing work at Cameco's Cigar Lake mine in Saskatchewan and a new report expected in the first quarter of 2010 could serve as upside catalysts for the share price, but Mr. Phillips does not see any major acquisitions in Cameco's pipeline.
He is also still positive on the company's long term upside, citing Cameco's strong balance sheet and developing free cash flow.