NuScale Power (SMR +6.99%) makes for a classic case study of how quickly investor sentiment can change for a stock. Few knew about the company until the end of last year. In the first half of 2024 though, NuScale Power stock surged a staggering 255.3%, according to data provided by S&P Global Market Intelligence. The nuclear energy stock's market capitalization is well over the $1 billion mark now.
For a stock that fell 69% in 2023, what changed so dramatically in a few months? Is NuScale Power the newest red-hot growth stock to buy, or is it a speculative bet?
Why is NuScale Power stock surging?
NuScale Power has developed a small modular reactor (SMR) technology that promises to deliver cost-effective, safe, and reliable carbon-free power. Its core NuScale power modules (NPMs) are built on nuclear reactor technology principles, and its power plants can accommodate up to 12 NPMs and generate about 924 million watts of electric capacity. So NuScale's technology can help build small, scalable modular nuclear power plants at a time when the world is transitioning to clean energy.
NuScale Power, however, has yet to manufacture NPMs. It also lost a contract earlier this year, which drove its first-quarter revenue 75% lower year over year to $1.4 million and sent its net loss soaring to $48.1 million. The company also cut its workforce by 28% earlier this year.
Why, then, did the stock skyrocket in recent months? Thank the U.S. government.
NYSE: SMR
Key Data Points
NuScale power stock ripped almost 50% higher in May alone after President Joe Biden signed the Prohibiting Russian Uranium Imports Act into law to ban the import of key nuclear fuel uranium from Russia. The government will spend $2.7 billion to boost the domestic uranium and nuclear energy industries. In June, the Department of Energy (DOE) issued a notice of intent for $900 million to fund SMR technology, also NuScale's forte. NuScale Power has already won four cost-share awards worth nearly $600 million from the DOE so far, and investors now expect it to get more government funding.
Should you buy NuScale Power stock now?
NuScale Power's SMR technology is the only one with a design certified by the U.S. Nuclear Regulatory Commission. The company counts engineering and construction giant Fluor as a major stakeholder and is collaborating with it on plant designs. NuScale Power also has no debt and held cash and cash equivalents worth $137 million as of March 31, 2024.
An early-stage company that's also debt-free could grow exponentially if it can successfully monetize its products and services. However, that remains a big if for NuScale as SMRs have yet to prove their usability in generating cheap and reliable nuclear power. Moreover, NuScale Power is still years away from commercialization -- it doesn't expect the three power plants that it's building for two customers to become operational before 2029. A lot could go wrong in between for NuScale Power, and its stock.
