Paladin Energy Ltd (ASX: PDN) shares were sold off on Wednesday.
The uranium producer's shares tumbled 11% to finish the day at $7.25.
This was driven by the release of the company's quarterly update.
Bell Potter has been looking at the update and has given its verdict on the ASX 200 stock. Let's see what it is saying.
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What is the broker saying?
Bell Potter was relatively pleased with the update. It highlights that its production was stronger than expected. Though, this was offset somewhat by softer than expected average realised prices and production guidance for FY 2026. It said:
PDN reported 4QFY25 production of 0.99Mlbs that beat ours and street estimates (VA 0.78Mlbs BPe 0.8Mlbs, QoQ +33%), driven by greater throughput of 1.2Mt (BPe 1.1Mt) and grade of 477ppm (BPe 404ppm).
Sales of 0.71Mlbs were in-line with our estimates and slightly ahead of consensus (VA 0.78Mlbs BPe 0.7Mlbs), however average realised prices disappointed at US$55.6/lb (BPe $60.7/lb). Cash unit cost of production declined 7.6% QoQ to US$37.5/lb as greater volumes were produced. FY26 Guidance was provided for production of 4.0-4.4Mlbs, sales 3.8-4.2Mlbs, cash costs of US$44-$48/lb and Capex of $26-32m. PDN finished with cash of US$89m, debt of US $86.5m and an undrawn facility of US$50m.
Commenting on its production guidance for FY 2026, the broker adds:
FY26 production guidance is lower than what we had modelled (BPe 4.8Mlbs) which was based off a ramp to full processing capacity in mid FY26. PDN expects to be running at full capacity in FY27, with the balance of mining fleet (51%) arriving ahead of 2HFY26. Our sales estimate (BPe 4.2Mlbs) was at the upper end of guidance. Our C1 costs of US$41/lb were also below the guided range.
We suspect management guidance is conservative, given the result in 4QFY25, and commentary around performance in 1HFY26 being "in-line" with 4QFY25.
Should you buy Paladin Energy shares?
The broker believes that the selloff on Wednesday was an overreaction and has created a buying opportunity for investors.
This morning, it has retained its buy rating on Paladin Energy's shares with a trimmed price target of $8.70 (from $9.20).
Based on its current share price, this implies potential upside of 20% for investors over the next 12 months.
Overall, the broker has reduced its earnings estimates and valuation slightly, but still sees plenty of value on offer here. It concludes:
The modelled impact of lower production in FY26 and higher costs see's an EBITDA decline of ~US$34m in FY26 on our numbers. The stock closed down 11% (A$360m in market cap). Comparing these two we concur that the reaction was overdone. Our TP declines to $8.70 and we retain our Buy recommendation.
