We recently started a series called “Penny Stock of the Day”. These ideas are geared towards traders with an extremely high risk appetite.

Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.

Penny Stock of the Day: Uranium Royalty Corp. (NASDAQ: UROY)

Today’s penny stock pick is the pure-play uranium royalty company, Uranium Royalty Corp. (NASDAQ: UROY).

Uranium Royalty Corp. acquires, accumulates, and manages a portfolio of geographically diversified uranium interests. Uranium Royalty Corp. has royalty interests in the McArthur River, Cigar Lake / Waterbury Lake, Roughrider, Russell Lake, Russell Lake south, and Dawn Lake projects in Saskatchewan, Canada; Anderson and San Rafael projects in Arizona; Lance and Reno Creek projects in Wyoming; Church Rock and Roca Honda projects in New Mexico; Dewey-Burdock project in South Dakota; Slick Rock project in Colorado; Langer Heinrich project in Namibia; and Michelin project in Newfoundland and Labrador, Canada; Energy Queen and Whirlwind project in Utah; and Workman Creek projects in Arizona.

Website:  https://www.uraniumroyalty.com/

Latest 10-k report:  https://www.uraniumroyalty.com/_resources/financials/UROY-40-F-04-30-2024.pdf?v=061705

Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for UROY in the last 3 months, the stock has an average price target of $3.83, which is nearly 52% upside from current levels.

Analysts | Source: TipRanks.com

Potential Catalysts / Reasons for the Hype:

  • The implementation of Trump’s executive orders (e.g., faster reactor approvals, SMR development) could lead to increased uranium demand by Q3 2025, potentially boosting UROY’s royalty streams.
  • The broader uranium sector is abuzz with speculation about increased M&A activity due to rising demand. The prevailing sentiment is that dozens of nuclear power plants are expected to be authorized and/or built to meet the needs of tech companies and their artificial intelligence (AI) applications. Nuclear energy is a truly clean and efficient power source, relying on uranium as a crucial fuel for nuclear reactors. UROY indirectly benefits from the growing energy needs of AI data centers, which are increasingly powered by nuclear energy and SMRs.
  • Analysts predict uranium prices could reach $140/lb (from $65/lb), driven by supply constraints. UROY’s royalty income is directly tied to these prices, making price spikes a key trigger.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown in purple lines. This is a possible bullish indication.

UROY – Daily Chart

#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.

#3 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.

#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.

#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.

UROY – Weekly Chart

#6 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.

Recommended Trade (based on the charts)

Buy Levels: If you want to get in on this trade, the ideal buy level for UROY is above the price of $2.60.

Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $4.80.

Stop Loss: To limit risk, place a stop loss at $1.90. Note that the stop loss is on a closing basis.

Our target potential upside is 46% to 85%.

For a risk of $0.70, our first target reward is $1.20, and the second target reward is $2.20. This is a nearly 1:2 and 1:3 risk-reward trade.

In other words, this trade offers 2x to 3x more potential upside than downside.

Potential Risks / Red Flags:

  1. The company has a history of net losses.

    UROY – Consolidated Statements of Operations

  2. The company relies heavily on uranium trading and royalty streams. This could pressure its financial stability if uranium prices or project developments underperform.
  3. Hedge Funds Decreased Holdings by 200.0K Shares Last Quarter.

    Hedge Funds | Source: TipRanks.com

  4. If global nuclear energy adoption slows or faces regulatory hurdles, demand for uranium could weaken, impacting UROY’s royalty income.
  5. UROY holds interests in uranium projects across Canada, the U.S., and Namibia. Geopolitical instability or changes in mining regulations in these regions could disrupt operations or royalty payments.
  6. A substantial majority of the Company’s royalty interests are on non-producing properties, or on properties that do not have established mineral reserves under applicable Canadian or United States disclosure standards. While a number of the properties underlying the Company’s current royalty interests are relatively advanced, only the McArthur River, Cigar Lake, and Langer Heinrich mines are currently in production.
  7. The Company had negative cash flow from operating activities in the fiscal periods since its incorporation.
  8. Despite being a loss-making company, the executives are being paid significant compensation.

    UROY – Executive Compensation

As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!

Happy Trading!

Trades of the Day Research Team

READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.

Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.

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Source: Trades of the Day