Should one consider investing in NuScale Power's stocks at the current moment?
In the ever-evolving landscape of power generation, NuScale Power Corporation, a company specialising in small modular reactor (SMR) technology, is making waves. Despite its innovative approach, the company's investment scenario is complex, given its pre-revenue status, lack of customer orders, and delayed project timelines.
NuScale Power, currently operating as a pre-revenue start-up, has not yet sold any of its technology to customers. The company has not generated significant revenue, with a total revenue of $49.04 million over the trailing twelve months (TTM) and a net income loss of $134.06 million[3]. While management expects to secure a customer order by the end of 2025[5], the lack of current orders presents a risk for investors.
The path to a functional nuclear power plant is long, regardless of modular designs. Even if a project is signed, it takes many years for a nuclear power plant to get built[2]. NuScale Power is currently awaiting additional approvals for enhanced power production capabilities, which could further delay project timelines[4]. Delays can impact investor confidence and the company's ability to generate revenue.
The market and analyst views on NuScale Power are mixed. The average analyst rating is "Buy," with a price target of $30.71, reflecting a decrease from current prices[3]. However, the stock has a beta of 2.05, indicating higher volatility compared to the broader market[3]. This volatility is evident in the stock's 52-week range of $6.88 to $45.31[3].
Despite some sell signals, the stock has shown recent gains, with both short-term sell and long-term buy signals in place[1][2]. However, the stock's price already reflects potential growth, so additional growth may not significantly improve returns for shareholders.
While NuScale Power presents an innovative technology with potential long-term growth, its current pre-revenue status, lack of customer orders, and delayed project timelines pose significant risks for investors. The viability of the investment depends on the company's ability to secure customer orders and advance its projects as planned. Investors should carefully weigh these risks against the potential for future growth in the SMR technology sector.
For risk-tolerant investors interested in emerging technologies, NuScale Power might be considered. However, it's crucial to closely monitor its progress and industry developments. More conservative investors may prefer to wait for clearer signs of revenue generation and project success before investing.
Nuclear power is coming back into vogue as a form of electric power generation, with utilities extending contracts for existing facilities and planning to bring new power sources to life in the next few years. As the first and only company to get approval from the Nuclear Regulatory Commission for a small modular design, NuScale Power is uniquely positioned in this market. The company also aims to license its small modular reactor technology to third parties to democratize the technology.
However, NuScale Power's current market cap of $11 billion means it needs to eventually generate billions of dollars in revenue to make an adequate return for shareholders[1]. Given its current revenue of $49 million and $98 million in negative free cash flow over the last 12 months, this is a considerable challenge[3].
Moreover, the company consistently raises money from capital markets, leading to rising shares outstanding and potential dilution for shareholders. This, combined with the uncertainty surrounding the signing of a viable project contract, makes NuScale Power a high-risk investment. As such, it may not be suitable for all portfolios.
References: [1] Yahoo Finance (2023). NuScale Power Corporation (SMR) Stock Quote.
- The complex investment scenario of NuScale Power Corporation, as a pre-revenue start-up in the finance sector, is influenced by its lack of customer orders, delayed project timelines, and the need to generate significant revenue in the money market to meet its market cap.
- In the technology industry, NuScale Power, with its innovative small modular reactor (SMR) technology, faces high risks as an investor due to its pre-revenue status, the long path to a functional nuclear power plant, and the uncertain signing of a viable project contract, which could potentially dilute shareholders' returns.
