Oklo (OKLO 4.97%), a developer of microreactors for nuclear power plants, went public through a merger with a special purpose acquisition company (SPAC) in May. The combined company's stock opened at $15.50 per share, underwent significant fluctuations, but now trades at approximately $80.
That's an impressive gain for an unprofitable company that hasn't yet generated any revenue. Will it deliver even bigger gains over the next five years? Let's review its business model, potential catalysts, and valuations to find out.
Image source: Getty Images.
Why did Oklo's stock soar?
Oklo's public debut generated a lot of buzz because Sam Altman, OpenAI's CEO, served as its chairman before its public debut. Its Aurora microreactor could also make it much easier to deploy off-grid nuclear reactors in remote areas.
The Aurora microreactor only generates 1.5 MWe of power, compared to a traditional nuclear reactor's 1,000 MWe (1 GWe) of power. However, multiple Aurora microreactors can be deployed together in a modular manner to generate power ranging from 15 MWe to 100 MWe.
The Aurora also uses metallic uranium fuel pellets -- which are denser, more resistant to high temperatures, and potentially cheaper to fabricate than the uranium dioxide fuel pellets used in traditional nuclear reactors. The Aurora only needs to be refueled every 10 to 20 years, while traditional nuclear reactors must be refueled every one to two years. In theory, both types of pellets can be reprocessed and recycled within their own closed loops eventually.
NYSE: OKLO
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What challenges does Oklo face?
Oklo's technology appears to be a significant leap forward for nuclear power. It finally broke ground on its first Powerhouse reactor in Idaho, with a maximum power level of 75 MWe, in September. The U.S. Air Force (USAF) recently awarded it a contract to build a small reactor for Eielson Air Force Base in Alaska. It's also working with Siemens Energy (SMNE.Y +0.00%) to engineer and deliver the steam turbine and generator systems, which will convert its reactor heat into electricity. That technology will help Oklo deploy its microreactors at scale.
However, the Nuclear Regulatory Commission (NRC) has still not approved its combined license application (COLA) for deploying and operating those reactors. It expects to submit the full application by the end of 2025, and the formal review process is anticipated to take two to three years.
That means that even if the approval process goes smoothly, Oklo is unlikely to deploy its first microreactors or generate any meaningful revenue until 2027 or 2028. For 2027, analysts expect the company to finally generate $16 million in revenue, despite incurring a net loss of $94 million.
With a market cap of $13 billion, Oklo might seem absurdly valued at 813 times its 2027 sales. It's also constantly diluting its shares with its secondary offerings and stock-based compensation. However, it could still have plenty of room to grow as the nuclear energy market expands. According to MarketGenics, the global microreactor market is expected to grow at a CAGR of 17% from 2025 to 2035, driven by the expansion of power-hungry cloud and AI markets.
There appears to be considerable pent-up demand for Oklo's microreactors. It has also entered into memorandums of understanding (MOUs) with several companies to explore the global deployment of its Aurora microreactors, and it has secured letters of intent (LOIs) from several major data center operators to examine the use of its microreactors. Those memorandums and letters could pave the way toward more binding contracts over the next few years.
Where will Oklo's stock be in five years?
To achieve that expansion, Oklo must maintain its first-mover advantage, secure more long-term contracts, and stay ahead of bigger nuclear companies like Westinghouse, which plans to start testing out its own eVinci microreactors in 2029.
Assuming Oklo deploys its first reactors in 2027, meets Wall Street's estimates, and grows its top line at a robust CAGR of 20% over the following three years, it could generate $28 million in revenue in 2030. If it trades at a generous 30 times its current year's sales by the final year, its market cap would reach $840 million -- which would still be 94% below its current valuation.
Even if Oklo matches analysts' estimates, grows at a faster CAGR of 50% through 2030, and trades at 50 times sales, its market cap would only reach $3.5 billion. That's still 73% below its current valuation -- which makes it seem more a meme stock than a growth stock.
Oklo's technology seems promising, but it's too hot to handle at these levels. Investors should stick with more reliable nuclear plays such as Cameco (CCJ 0.13%) -- the world's second-largest uranium miner -- instead of placing too much faith in Oklo's nascent microreactor technology.
