Centrus Energy (LEU) saw a large trade on 12/3 sell 1000 April $80 puts to open $19 down to $17.20, the kind of trade we like to see to know a pullback is ending although in this volatile name puts break-even at around $62 for the put seller. LEU also has 5000 December $60 short puts in open interest and has seen some buys in January $105, $125 and $140 calls. LEU has formed a falling wedge pattern and the low this week bounced right at the rising 55-MA while a move above $95.50 would break out of the wedge.

Centrus is a trusted supplier of nuclear fuel components and services for the nuclear power industry, which provides a reliable source of carbon-free energy. Centrus operates two business segments: (a) LEU, which supplies various components of nuclear fuel to commercial customers from its global network of suppliers, and (b) Technical Solutions, which provides advanced engineering, design, and manufacturing services to government and private sector customers and is deploying uranium enrichment and other capabilities necessary for production of advanced nuclear fuel to power existing and next-generation reactors around the world. The LEU segment provides most of the Company’s revenue and involves the sale of enriched uranium, the fissile component of nuclear fuel, primarily to utilities that operate commercial nuclear power plants.LEU is a critical component in the production of nuclear fuel for reactors that produce electricity.

Centrus is pioneering U.S. production of HALEU, enabling the deployment of a new generation of HALEU-fueled reactors to meet the world’s growing need for carbon-free power. HALEU is a high-performance nuclear fuel component which will be required by a number of advanced reactor and fuel designs that are now under development for commercial and government uses. While existing reactors typically operate on LEU with the U235 concentration below 5%, HALEU is further enriched so that the U235 concentration is between 5% and 20%. The higher U235 concentration offers a number of potential advantages, which may include better fuel utilization, improved performance, fewer refueling outages, simpler reactor designs, reduced waste volumes, and greater nonproliferation resistance.  Centrus began demonstrating production of high-assay low-enriched uranium, or HALEU, in Piketon, Ohio, which is the only licensed and operating HALEU production facility in the Western world.

Nuclear is a strong theme. Big tech companies are making historic investments. Reactors that shut down just a few years ago are set to restart. Policymakers have made a multibillion-dollar commitment to our domestic nuclear fuel supply chain.

LEU has a market cap of $1.26B and trades 27.55X Earnings, 20X EBITDA and 3.2X Sales. LEU revenues are seen rising 5.7% in FY25 with 12.4% EPS growth. Centrus has made enormous progress in recent months in securing two critical awards from the Department of Energy as well as $2.0 billion in contingent commitments from customers to support a potential expansion of its Ohio enrichment facility. Due to the nature of the business, Centrus has a lot of quarter-to-quarter fluctuation in results. Revenues and margins go up and down depending on how many deliveries happen to fall into a particular quarter and whether those deliveries come from higher or lower priced set contracts.

LEU short interest has steadily been climbing to 12.7% of the float from less than 5% in April. Analysts have an average target of $113. Lake Street with a $154 target says the next 6-12 months are setting up to be an inflection point for Centrus as it finalizes plans to ramp domestic LEU and HALEU enrichment.

LEU is the only publicly traded uranium enrichment company in the world and the only one with an American technology. Next year, the Pentagon will begin testing prototype HALEU-fueled microreactor at Idaho National Laboratory. Meanwhile, the US Air Force is looking to host the microreactor in Alaska. LEU stock may be a bumpy ride but it has major scarcity value as a play on the American nuclear resurgence.