Should you buy the 10% dip on this ASX 300 uranium stock?

Could big returns be on the cards for buyers of this stock? Let's see what analysts are saying.

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Deep Yellow Limited (ASX: DYL) shares are under pressure on Wednesday.

In afternoon trade, the ASX 300 uranium stock is down 1.5% to $1.36.

This means that its shares are now down 10% since late last week.

Why is this ASX 300 uranium stock falling?

Today's weakness has been driven by the release of the company's quarterly update this morning.

As Deep Yellow isn't producing uranium yet, it inevitably reported further cash burn during the three months.

However, that doesn't necessarily mean its cash balance went backwards. Thanks to a major capital raising, the ASX 300 uranium stock finished the period with a cash balance of $155.6 million. This is up from $25.25 million three months earlier. This also excludes $30 million raised via a share purchase plan in the current quarter.

In addition, it is worth remembering that the financial side of things is less important for investors at this stage. The true focus is on the development of its projects.

The good news is that the company made a lot of progress during the quarter. And the even better news is that the "uranium market outlook continues to be very strong with nuclear demand expected to continue outpacing supply over the mid-term."

This positions Deep Yellow well for when its flagship Tumas Project in Namibia comes online.

If all goes to plan, the company expects to make a final investment decision for the development of the Tumas Project in time to allow production to commence during the latter part of 2026.

Should you buy Deep Yellow shares?

Analysts at Bell Potter have been feeling very positive about the company and its outlook.

And while the broker has yet to respond to its quarterly update, it recently put a speculative buy rating and $1.90 price target on its shares.

If this proves accurate, it will mean a handsome 40% return from this ASX 300 uranium stock over the next 12 months.

Commenting on its buy recommendation, the broker said:

We maintain a Speculative Buy rating on DYL, and valuation of $1.90/sh (previously $1.81/sh). Our valuation is adjusted on updating the most recent pro-forma cash balance, our uranium price forecasts, and adjustments to our development timelines for Tumas and Mulga Rock. Further upside in uranium remains, as limited near-term supply spurs the spot market whilst the global path to decarbonisation shapes the role of nuclear over the longer-term.

Following the merger with VMY (Vimy – de-listed), DYL has a Mineral Resource Estimate (MRE) of 431mlbs U3O8, and an Ore Reserve of 110mlbs U3O8. We see DYL as being attractively positioned in a rising uranium bull market, capable of delivering the next wave of supply into an increasingly tight market.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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