There are a lot of options for investors to choose from in the uranium industry.
But one of the best right now could be Paladin Energy Ltd (ASX: PDN).
That's the view of analysts at Bell Potter, which are very positive on the beaten down ASX uranium stock.
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What is the broker saying about this ASX uranium stock?
The broker highlights that Paladin Energy will be releasing its quarterly update next week.
Unfortunately, production issues means that a softer quarter is expected. It said:
We estimate Production of 0.54Mlbs at Langer Heinrich in 2QFY25. This implies a QoQ change of – 15% from 1QFY25 which was marred by production issues stemming from 1) lower than anticipated stockpile grades and 2) water availability in Namibia.
Bell Potter acknowledges that this means that investor confidence has been hit recently. However, it remains positive and expects a stabilisation of production to help rebuild confidence. The broker adds:
Management have the task of stabilising production at Langer over the coming periods to rebuild investor support. The closure of the Fission transaction in December should have eased some concerns, however the road to redemption will take some time.
Uranium bull market
But instead of the above, the broker believes investors should be focusing on the potential for a multi-year uranium bull market. This certainly would be good news for this ASX uranium stock.
Commenting on its bullish view of the chemical element, Bell Potter said:
Fundamentally, the data continues to suggest higher prices across the entire nuclear fuel chain over the coming years. In reality however, the spot market has seen increased downside volatility, currently at US$72/lb. We highlighted in CY24 the risk lower near-term prices have on projects expected to reach FID over the next 12m, which has seen Deep Yellow delay a decision until the end of March-25. This further perpetuates the primary shortage in supply, and increases the risks of near-term price spikes on changes to production.
Buy recommendation
Bell Potter has retained its buy rating on the ASX uranium stock with an increased price target of $10.50.
Based on its current share price of $8.18, this implies potential upside of 28% for investors over the next 12 months. It concludes:
We retain our Buy recommendation and increase our price target to $10.50/sh (previously $9.70) on tweaks to our production assumptions. Our production and sales outlook for FY25; 2.9Mlbs production and 2.8Mlbs sales (vs guidance – production 3.0- 3.6Mlbs) and unit operating costs (C1 US $47/lb). We have marked to market our uranium price assumptions to account for weaker than anticipated pricing in December.
