Paladin extends losses, analysts say investors 'overreacted'
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The news: Paladin Energy extended losses on the ASX following a raft of downgrades from analysts, as the uranium producer's first-quarter results missed forecasts.
The numbers: Paladin shares were down 2.75% to $10.08 by 2:00pm AEDT, after closing 15.3% lower on Monday.
Analysts made the following revisions to their coverage:
- Bell Potter kept its 'buy' rating but cut its price target from $15.70 to $14.40;
- Citi remains 'buy' rated but decreased its target price from $15 to $14.60;
- Morgan Stanley retained its 'overweight' rating but lowered its price target from $12.40 to $12.30; and
- Macquarie slashed its earnings per share (EPS) forecasts by 46% in FY25, 12% in FY26 and 11% in FY27.
The context: Bell Potter analyst Regan Burrows called Paladin's Q1 result a "disappointing start to FY25", with production of 640,000 pounds or uranium yellowcake missing consensus estimates of 917,900 pounds.
C1 costs of USD41.90 ($63.71) per pound also came in higher than FY25 guidance of USD31 per pound. However, Burrows said "we think the market reaction to be disproportionate".
Citi analysts also believe investors "overreacted" following Monday's sell-off. However, they now expect Paladin to hit the bottom end of full-year production guidance and the top end of cost guidance, with FY25 NPAT down 11%.
Morgan Stanley analysts called Monday's sell off "outsized" and said their investment thesis remains largely unchanged with longer-term fundamentals remaining. They said Paladin is placed to benefit from a "nuclear renaissance" and its acquisition of Canada's Fission Uranium could position the company as a "meaningful global uranium producer", if approved.
Macquarie analysts said that its near-term (EPS) downgrade is large, but longer-term estimates are "far less" impacted.
The sources: Bell Potter research, Citi research, Morgan Stanley research, Macquarie research
