NuScale Power (SMR 2.91%), a developer of small modular reactors (SMRs) for nuclear power plants, went public through a merger with a special purpose acquisition company (SPAC) in May 2022. Its stock opened at $10.70 on the first day, rose to an all-time high of $53.43 last October, but now trades at about $19. Let's examine why NuScale's stock is so volatile and why it could potentially deliver a ten-bagger gain for its patient investors over the next decade.
How could NuScale revolutionize nuclear power plants?
NuScale's newest SMRs are installed in vessels that are 15 feet wide and 76 feet tall. It pre-fabricates these smaller reactors and assembles them on-site to reduce the time, labor, and expenses required to construct a nuclear power plant. Their modular design enables them to be deployed in areas that aren't well-suited for traditional nuclear reactors.
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NuScale is the only company that has received Standard Design Approvals (SDAs) from the U.S. Nuclear Regulatory Commission (NRC) for its SMRs. The NRC approved its 50 MWe design in early 2023 and its 77 MWe design last May.
It can chain together multiple modules to produce more scalable nuclear power plants with smaller physical footprints than traditional plants. The renewed interest in nuclear power -- spurred by the rapid growth of the power-hungry cloud, high-performance computing (HPC), and artificial intelligence (AI) markets -- should generate long-term tailwinds for that market.
NYSE: SMR
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What challenges does NuScale face?
NuScale initially planned to deploy six of its 77 MWe SMRs in Idaho to power a 462 MWe plant, but it abandoned that expensive project in 2023. Last January, it laid off 40% of its workforce as its costs overwhelmed its anemic revenues.
Today, NuScale generates most of its revenue by working as a subcontractor for Fluor's (FLR 3.36%) planned construction of a 462 MWe plant for Romania's RoPower. However, that project is still in the front-end engineering and design (FEED) phase, and it won't move forward until it receives a final investment decision (FID) this year.
Until that happens, it will only generate modest revenues from those FEED studies. It hasn't actually sold or deployed any of its SMRs yet.
Last September, it returned to the U.S. market by agreeing to deploy up to six gigawatts of its SMR capacity across a seven-state service region for the Tennessee Valley Authority (TVA). However, those plants won't be fully activated until 2032.
How much larger could NuScale grow over the next decade?
For 2025, analysts expect NuScale to generate only $40 million in revenue, as it incurs a net loss of $360 million. Yet from 2025 to 2027, they expect its revenue to soar more than eightfold to $293 million as it narrows its net loss to $67 million.
That outlook sounds promising, but it hinges on a favorable FID in Romania, the timely advancement of its TVA project in the U.S., and its ability to secure more hyperscale data center customers to capitalize on the expansion of the cloud, HPC, and AI markets. According to Research and Markets, the nascent SMR market could expand at a CAGR of 42.3% from 2024 to 2035 amid a soaring demand for cheaper, smaller, and more scalable nuclear power plants.
With a market capitalization of $5.5 billion, NuScale's stock might seem expensive at 19 times its 2027 sales. However, if it maintains its pace with the expanding SMR market and grows its top line at a CAGR of 40% from 2024 to 2035, it could generate $1.5 billion in revenue by 2035. If it trades at 37 times sales by the final year, its market cap would rise tenfold to $55.5 billion.
We should take that speculative outlook with a grain of salt, but it shows that NuScale has the potential to deliver a tenbagger gain over the next ten years. However, if its new commercial projects fizzle out -- as it did in Idaho -- its stock could sink a lot lower.
