Down 55% in 6 Months, Why I Think Paladin Energy Stock Is Now a Bargain

Paladin Energy Ltd. (ASX:PDN) shares have seen a sharp decline over the past six months.

And this, despite yesterday’s strong progression, which saw the shares of the S&P/ASX 200 Index (ASX:XJO) uranium stock closes up 8.2% at $7.45 apiece.

Yet just six months ago, on May 14, these same stocks closed the day changing hands for $16.37 each.

This causes Paladin Energy shares to fall painfully by 55% in six months.

To put this into context, the ASX 200 has gained almost 6% over this same period.

However, to be fair, most ASX uranium stocks are also deep in the red over the past six months, with the price of uranium having fallen from around US$93 per pound to as high as US$77 the pound since the beginning of May.

What put pressure on the ASX 200 uranium stock?

In addition to the drop in the price of uranium, which was as low as US$108 per pound last February, Paladin Energy shares have suffered some outsized daily losses over the past six weeks.

On October 28, shares closed the day down 15.3% following the miner’s first quarter update.

On the positive side, production at Paladin’s Langer Heinrich Mine (LHM), located in Namibia, continued to accelerate during the quarter. The miner produced 640,000 pounds of U3O8 over the three months, up 23% from the previous quarter.

But ASX investors were left jittery after management reported “near-term operational challenges” that impacted ore feed, recovery rates and production volumes at LHM. To address these ongoing issues, the company announced it would shut down operations for approximately two weeks in November.

Which brings us to the next big down day for Paladin Energy stock.

On Tuesday, November 12, the ASX 200 uranium stock closed the day down sharply by 28.9%.

This follows a disappointing full-year guidance update for LHM.

After lower-than-expected uranium production results in October, management reduced its fiscal 2025 production guidance to 3.0 million to 3.6 million pounds, down from the previous forecast of 4,000,000 pounds. 0 million to 4.5 million pounds.

Why Paladin Energy Stock Now Looks Like a Bargain

So why do I think Paladin Energy stock is now trading at a long-term bargain?

In short, I believe investors have overreacted to the recent commissioning issues experienced during LHM’s ramp-up phases.

While this is clearly disappointing in the short term, the recent setbacks appear temporary.

With the planned LHM shutdown scheduled for the second half of November, management expects to achieve higher uranium production levels in the second half of fiscal 2025.

On the growth front, shareholders of Fission Uranium Corp. (TSX: FCU) approved Paladin Energy’s takeover offer in September.

“Fission’s Patterson Lake South project is a natural fit for Paladin, providing medium-term development potential to increase production from the recently restarted Langer Heinrich mine,” Paladin CEO Ian Purdy said that day.

And for investors with a long-term horizon, I believe the story of the nuclear renaissance that reignited interest in uranium miners in 2023 and 2024 has not gone away.

As nations around the world are eager to achieve reliable, low-emissions baseload power, 27 countries have declared their intention to increase their own nuclear energy mix. Indeed, the World Nuclear Association expects that global demand for uranium will likely exceed global supply through 2040.

And that doesn’t even take into account the massive amount of energy that will likely be needed to run the power-hungry data centers driving the artificial intelligence (AI) revolution.

In what could prove to be good news for Paladin Energy stock in the long term, companies including Microsoft (NASDAQ: MSFT) are turning to nuclear energy to power their own AI expansion plans.