Oklo (OKLO -3.95%) stock, a start-up nuclear power company developing mini-nuclear reactors, surged more than 10% yesterday after announcing a partnership with Korea Hydro & Nuclear Power. Alongside Centrus Energy (LEU -3.44%), the company has been riding an even bigger wave of investor enthusiasm that began last week, when President Trump on Friday signed a series of executive orders to promote development of the nuclear power industry in America.
Both stocks are up again modestly today, with Oklo stock rising 1.7% through 10:30 a.m. ET, and Centrus Energy stock up about twice that -- a 3.4% gain.
In contrast, electric utility AES (AES 3.76%), which does not operate nuclear power plants, seems to be missing out entirely on the nuclear stocks boom. AES stock is down 3.7% today, and down an even more dramatic 52% over the past 52 weeks.
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Oklo and Centrus in the news
Yesterday, Oklo said it will collaborate with its Korean partner to advance the technology of its new Aurora powerhouse, as well as Korea Hydro's own "innovative domestic advanced nuclear technology, the i-SMR." The announcement seems to have caught the attention of investment bank William Blair, which initiated coverage of Oklo stock today with an "outperform" rating.
Oklo plans to build a 75-megawatt Aurora powerhouse at the Idaho National Laboratory site, and says it has another 14 gigawatts of nuclear power plants lined up after that, in its "growing order pipeline." Blair says the company has laid out "a fast-tracked regulatory pathway called a custom combined construction and operating license approval (COLA)" that "will permit Oklo to capture upside from rising electricity prices, especially from premium clean energy PPAs," as StreetInsider.com reports today.
The analyst also likes Oklo's vertically integrated business model, in which the company intends to not only design but also build, own, and operate its own nuclear power plants.
Blair also likes Centrus Energy, but for different reasons. In today's note, the banker pointed out that Centrus currently holds one of only two Nuclear Regulatory Commission (NRC) licenses that have been issued for low-enriched uranium (LEU). Centrus holds the only NRC license issued for enriching uranium to high levels, turning it into what is called "high-assay low-enriched uranium," or "HALEU."
This places Centrus in a prime position to benefit from U.S. government policy to decrease reliance on Russia to sell us enriched uranium for use in U.S. nuclear power plants. And Blair places a value of about $15 billion on this market -- which Centrus apparently owns 50% to 100% of!
Which nuclear power stock should you buy?
Blair values Oklo stock at $70 per share, versus the $55 and change that the stock costs today. The prospect of a 27% profit may tempt investors, but beware: Oklo remains in start-up mode, has no revenue coming in, and isn't expected to begin generating revenue before 2027. Analysts polled by S&P Global Market Intelligence don't expect to see profitability before 2029.
And Centrus?
Blair has a $185 fair valuation on Centrus stock, implying that one could go up as much as 45%. What's more, Centrus is already more of a going concern, with $471 million in revenue collected over the last 12 months, and a very respectable $106 million profit.
At $2.2 billion in market capitalization currently, the stock only costs about 20 times earnings. With a big Trump tailwind at its back, Centrus stock could be a winner.
And what about AES?
What about AES stock, today's big loser?
AES has been in a downtrend since reporting a sizable earnings miss early in the month. (AES was supposed to earn $0.34 per share in Q1, but reported only a $0.27 adjusted profit). The Fly points out that the company's guidance for the rest of this year looked weak as well. And just yesterday, Argus Research analyst John Eade downgraded AES stock to "hold," warning of a "strained" balance sheet and growth prospects that don't get out of the mid-single digits this year.
That may not sound exciting to momentum traders swept up in the nuclear wave this week. But AES stock has a lot to recommend itself to value and dividend investors. Its $7.2 billion market cap and $1.3 billion in trailing earnings mean the stock costs barely 5.5 times trailing earnings, and AES pays a generous dividend yield of nearly 7%.
Does AES also carry a lot of debt? It does -- nearly $30 billion, net of cash on hand. But AES is making good use of its debt to produce profits and divvy out dividends to its shareholders. It may not be as sexy as a nuclear stock, but for long-term, value-focused investors, AES stock may end up as the most rewarding investment of the three.
