NuScale Power (SMR 4.02%) has been a divisive stock since its public debut in May 2022. The bulls were impressed by the disruptive potential of its small modular reactors (SMRs) to change the status quo in the nuclear power industry while the bears claimed that its business model was unsustainable, its future was murky, and the stock's valuation was too high. At first, the bears' view dominated, and the stock sank over the year and a half that followed its IPO.
But over the past 12 months, shares of NuScale surged by more than 330% as some of those bearish concerns faded. Should investors chase that rally right now?
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What does NuScale Power do?
NuScale's SMRs can be installed in vessels that are as small as nine feet wide and 65 feet high, and the modular pieces are pre-fabricated, so they can be delivered and assembled on site. That flexibility will enable nuclear power companies to site them in locations that aren't well-suited for larger nuclear reactors.
NuScale produces the only SMRs that have been certified with a Standard Design Approval (SDA) from the U.S. Nuclear Regulatory Commission. However, that certification only covers reactors that can generate up to 50 megawatts (MW) of electricity. For its reactor clusters to be more cost-effective than coal, they must each generate at least 77 MW of electricity.
NuScale expects the long-awaited Nuclear Regulatory Commission review of its 77 MW module to conclude by mid-2025. During its fourth-quarter conference call, CEO John Hopkins predicted that approval would enable it to serve a "broader spectrum of customers while enhancing economic efficiency." It would also widen the company's moat against its potential competitors.
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Key Data Points
In 2023, soaring costs forced NuScale to cancel its plan to build six nuclear reactors in Idaho through 2030. It laid off more than 40% of its employees in early 2024, and its stock sank to an all-time low of $1.92 on Jan. 18, 2024.
Why did NuScale's scale soar over the past year?
However, in the year or so since then, several catalysts have pushed NuScale's stock back upward. It signed a new supply deal with South Korea's Doosan Enerbility for a steady supply of SMR components, the U.S. Department of Energy (DOE) offered it up to $900 million in cost-shared funds to develop SMRs, and Amazon (AMZN 2.61%) unveiled a plan to support the development of more SMRs.
NuScale also continues to advance its 462 MW power plant project for Romania's RoPower as a subcontractor to its top investor, Fluor (FLR 2.48%). The contract for the first phase of that front-end engineering and design (FEED) project was signed in December 2022, and it signed the contract for the second phase last July.
NuScale's growing business in Romania significantly boosted its revenue over the past year, which offset the shutdown of its project in Idaho. That's why its revenue surged by 62% to $37 million in 2024. However, its net loss widened from $180 million to $348 million and the company still hasn't secured any new contracts in the U.S. market.
For 2025, analysts on average expect NuScale's revenue to more than double to $74 million as it narrows its net loss to $84 million. In 2026, they expect its revenue will nearly triple to $219 million as it further narrows its net loss to $76 million.
That relatively rosy outlook is likely based on several assumptions: that the Nuclear Regulatory Commission will approve its 77 MW design; that NuScale will secure some DOE funds; that it will expand its business in Romania; and that it will secure more U.S. contracts as tech giants like Amazon, Microsoft, and Meta Platforms ramp up their investments in cheap and efficient energy sources like SMRs to power their growing cloud infrastructure operations.
NuScale won't turn profitable anytime soon. But with $447 million in cash, cash equivalents, and short-term investments on its books as of the end of 2024, it can afford to rack up some more losses over the next few years as it expands its business.
But is it the right time to invest in NuScale Power?
With an enterprise value of $2.1 billion, NuScale doesn't look terribly expensive at 10 times next year's sales. However, it increased its number of outstanding shares by 83% over the past two years through its secondary stock offerings and stock-based compensation. Its insiders also sold 16 times as many shares as they bought over the past 12 months. The combination of that ongoing dilution and chilly insider sentiment suggests that the stock's upside potential could remain limited until NuScale stabilizes its domestic business.
NuScale's stock might be worth nibbling on as a speculative play on the nascent SMR market, but I wouldn't back up the truck yet. The company still faces a lot of unpredictable challenges, and the stock could be easily cut in half before it doubles again.
