Centrus Energy Hits Critical Mass for Atomic Short-Squeeze

Key Points

• Centrus Energy Group is perfectly positioned as the sole provider of HALEU nuclear fuel in the U.S. 
• It is working on expanding its centrifuge capacity in preparation for improving demand from global utilities. 
• A short squeeze is in play driven by results, new contracts, and a growing backlog. 

The market for Centrus Energy NYSE: LEU has reached a critical mass, and an atomic short-squeeze is on. The market has already risen more than 50% this year and could increase by another 25% to 35% if the critical resistance point is breached.

That may happen before mid-year because institutional ownership is rising and activity is ramping sequentially, providing a strong tailwind in addition to the short interest. The short interest at the end of January wasn’t phenomenally high but sufficient to fuel a squeeze at 22%.

Centrus Energy is perfectly positioned for the U.S. nuclear energy market as a provider of nuclear fuels, precisely HALEU fuel. HALEU fuel is high-assay low-enriched uranium. It has a higher purity than standard fuel-quality uranium but far less than weapons-grade. It is critical because it is essential to improving reactor efficiency and safety while reducing proliferation risk. Results in 2024 include a growing backlog tied to new government contracts and plans for expanding production because of the same. The latest expansion includes centrifuge production, essential for building Centrus HALEU centrifuge cascades, ramping to full-scale output, and derisking its business. 

Russian Uranium Ban Clouds Outlook for Centrus Energy

Congress passed a law banning the importation of LEU from Russia, which was met by Russia’s export ban. This is critical because Centrus gets its LEU from Russia while building its centrifuges and must get special waivers to continue operations. As it is, the company and its partner in Russia have the appropriate waivers to conduct business through the end of the year. 

Centrus's financial outlook is also cloudy, raising risk for investors. The company issued more than $402 million in debt to shore up the balance sheet and has sufficient capital to consider strategic acquisition but is not out of the woods. Developing its centrifuge array is costly and will likely require additional funding, including dilutive actions. Until then, balance sheet highlights include a net cash position, increased cash, assets, and equity. 

The outlook for 2025 and 2026 results presents a potential stumbling block for the business. Although the backlog is up significantly and improves the outlook through 2040, revenue streams tied to government contracts are highly visible and don’t present a growth opportunity today. The current consensus is for revenue to hold flat over the next two years and for earnings quality to deteriorate as uranium demand underpins higher input costs and expansion efforts cut into profits.

Analysts' Sentiment for Centrus Energy Provides Dubious Support for This Market 

While institutional activity is ramping higher and ownership is increasing to over 50%, analysts' activity remains lackluster. MarketBeat tracks only three analysts with ratings, and their outlook provides little conviction to the consensus. The sentiment ratings include two Holds and one Buy, with price targets ranging from $58 to $126, providing a consensus figure nearly 20% below the critical resistance target and plenty of margin for error. The high-end target is above the critical resistance target but insufficient to drive this market. It was set by B. Riley in October 2024, on the same day Roth MKM lowered its target to $58. 

The promising technical action shows solid support near $70 and plenty of bullish indications, but there is risk. The market is showing resistance at the critical level, and the volume is declining, which reveals a market losing interest. If this persists, it is unlikely this stock will move much higher, and short-interest may be reinvigorated. However, a move above $118.36 would be a significant change, opening the door to another $30 upside.