After the Fukushima nuclear reactor meltdown in 2011, countries around the world reconsidered their dedication to nuclear power. Fast-forward to today, and nuclear power appears to be experiencing a renaissance. This nuclear resurgence is the world in which NuScale Power (SMR 0.36%) operates -- and it represents both opportunities and risks.
So is worth buying the stock under $23 a share, which is around its all-time high?
Where is NuScale Power's stock today?
To start off, NuScale Power's shares ended Oct. 28, trading hands for about $22.00 a piece. So, if you buy the stock today you are buying it at, or at least very close to, its all-time highs. It wouldn't take much to push the stock back up to its 52-week intraday high of $22.24. Is it worth paying top dollar for this company?
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The answer depends on what you think of its prospects and about the future of nuclear power more generally. Before broaching those topics, it will help to discuss one other small fact about NuScale Power's stock. Its 52-week low is just $1.81 per share. You could do the math on the return here if you had bought at the low, but the percentage would be so large that the number would be almost meaningless. This stock has taken off like a rocket ship!
The key takeaway is that if you buy NuScale Power now, you could be getting in a little late. At the very least, you are buying amid broad investor enthusiasm, which can sometimes get a little irrational over the short term. And that's the crux of the problem. Do you believe, after such a massive stock price advance, that NuScale Power's future is still bright enough to justify buying it in anticipation of an even higher stock price?
Nuclear power and NuScale's place at the table
Nuclear power is an always-on (often called baseload) energy source that doesn't emit greenhouse gasses. Thus, it is a reliable clean energy source at a time when the world is shifting away from dirtier fuels. Most people think about solar and wind power, but nuclear's ability to provide baseload power has companies reconsidering it as an option.
For example, Microsoft just agreed to buy all of the power from a nuclear power plant that Constellation Energy plans to restart. The plant was shut down when nuclear power was out of favor, but Microsoft's data centers need clean power, and nuclear appears to be a favored solution. This is just one example, too; Alphabet has made a similar deal with a privately held company for basically the same reason.
Reopening retired nuclear power plants is fine, but it doesn't address the real problem -- the world needs more power. There are only so many shuttered nuclear power plants that can be reopened, and building new plants is time consuming and expensive. Just ask Southern Company, which just opened the second of two new plants in early 2024, years late and billions over budget.
NYSE: SMR
Key Data Points
NuScale Power's place in this story is interesting. It is working on getting the approvals needed to build small-scale modular nuclear reactors. It has a design but still doesn't have the go-ahead it needs from regulators to start building and selling its product.
Simply put, there's a lot more money that has to be spent before NuScale's business is really up and running in a meaningful way. And if it doesn't get the approvals needed, well, there is really no business here. It is a huge gamble at this point that only aggressive investors should consider. Moreover, you have to believe in both the long-term upside of nuclear and of small-scale modular reactors for the company to be a solid investment.
That said, SMRs, as they are often called, are an exciting idea in many ways. Because they are smaller than a large reactor, they are expected to be safer to operate. Because they are modular, they can be built in a factory, reducing costs and complexity. And because they are small and modular, they can be easily transported to where they are needed and linked together to create larger power sources, as needed. It is an elegant solution if NuScale Power can get its plans approved.
NuScale is probably best left on the watch list for most investors
NuScale is a story stock. If you believe strongly in that story, you might want to buy it. But there is always the risk that the story won't play out as planned, which would probably lead to a steep stock price decline. Given how early NuScale Power is in the development of its business, uncertainty is fairly high here.
As already noted, this is a stock for aggressive investors. If that isn't you, but you still like the idea of an SMR stock, maybe put this one on your watch list. The company's next big hurdle along the approval process is expected to come in mid-2025.
