Paladin Energy Ltd (ASX: PDN) shares have pulled back this week following the release of its quarterly update.
While this is disappointing, the team at Macquarie Group Ltd (ASX: MQG) believes that it could have created a buying opportunity for investors.
What is the broker saying about Paladin Energy?
Macquarie was pleased with the uranium producer's quarterly update and highlights that its production was well ahead of expectations.
And given this strong performance, the broker feels that management's guidance for FY 2026 is conservative. It said:
Given the 4Q production (993,843lbs), the FY26 guide of 4.0-4.4Mlb – in a period of ramp-up and increased availability of freshly mined ore – appears to be quite conservative, and appears to allow for disruptions/downtime/operational surprises. Disclosure around the build-up of guidance (eg, % blend, grades assumed) has not been provided. This is a new approach, and a significant reset for PDN, after a couple of high-profile guidance issues in FY25.
Macquarie also notes that the market was disappointed with the company's cost guidance for the year ahead. However, it feels that this guidance is reflective of its ramp up and not indicative of life of mine (LOM) costs. It adds:
Production costs of US$44-48/lb in FY26 was higher than consensus (VA consensus US$39/lb), but we think reflects a ramp year and doesn't fully translate into higher LOM costs. Capex of US $26-32m in line with MRE (US$29m).
Should you buy Paladin Energy shares?
Macquarie thinks investors should be snapping up the uranium producer's shares while they are down.
In response to its quarterly update, the broker has retained its outperform rating with a trimmed price target of $8.25.
Based on its current share price of $7.39, this implies potential upside of almost 12% for investors over the next 12 months.
Commenting on its bullish view of the stock, the broker said:
Outperform. Excellent progress in 4Q at LHM; market has overreacted in our view to a more conservative FY26 guide. We expect new management can increase market confidence with a more conservative guidance approach, and establish a track record of delivery (on LHM ramp & PLS delivery).
Our TP is -2.4% to $8.25/sh on lower production & higher costs at LHM in FY26e. Still based on a 1.0x NAV; we raise our risking on PLS to 75% (was 70%), and still carry only minor value ($0.60/sh) on other resources.
