If you are looking for outsized returns for your investment portfolio and have a higher than average tolerance for risk, then it could pay to listen to what Macquarie Group Ltd (ASX: MQG) is saying about one ASX 200 stock.
That's because if everything goes to plan, the broker sees potential for this stock to deliver mouth-watering returns for investors over the next 12 months.
Which ASX 200 stock?
The stock that Macquarie is recommending as a buy is Paladin Energy Ltd (ASX: PDN).
It is a uranium producer that has been sold off recently due to its poor operational performance, which has been caused most recently by heavy rainfall in Namibia.
Commenting on recent developments, the broker said:
Major rainfall in Namibia caused PDN to withdraw FY25 guidance and push back its ramp, as it now sees a longer period of ore blending. Langer Heinrich production thus far been disappointing, on stockpile variability and now weather impacting the site & delaying mining phase.
A challenging setback, major earnings deferral, however given no major damage to the processing plant we expect recovery will trigger additional opex but unlikely major capex. LHM processing has resumed, but will take some weeks to get back to normal as stockpiles are dried, chemistry is stabilised and surface/pit water is cleared. Road repairs will take time. An ore blending strategy will need to be adopted for a longer period of time, resulting in lower FY25/FY26 grades.
Time to buy
While the above is disappointing, Macquarie doesn't think it should sour your view of the ASX 200 stock.
In fact, due to the significant share price weakness it has experienced this year (down 36% year to date), the broker feels that now is the time to jump on board the uranium train. Especially given its acquisition of Fission Uranium.
According to the note, the broker has upgraded the ASX 200 stock to an outperform rating with an $8.25 price target.
Based on its current share price of $5.06, this implies potential upside of 63% for investors between now and this time next year.
To put that into context, a $5,000 investment in Paladin Energy would turn into $8,150 in a year if Macquarie is on the money with its recommendation. It concludes:
Upgrade to Outperform. Shares -35% since we reinstated in January (following the closure of Fission acquisition), on a declining spot prices (we expect some recovery over 6-12 mths), lower stockpile grades & now this major weather event.
