Exploring NuScale Power's Stock: An Unbiased Take
Exploring NuScale Power's Stock: An Unbiased Take
We're witnessing a resurgence in nuclear energy, fueled by advances in technology, particularly Artificial Intelligence (AI). This technological shift has led to increased electricity demand in the United States, making nuclear power an attractive investment option once again. One company capitalizing on this trend is NuScale Power Corporation (SMR: 13.48%), a disruptor in the nuclear energy sector.
NuScale Power is developing small modular reactors (SMRs), addressing the limitations and high costs of traditional nuclear power plants. SMRs are smaller, cheaper to build, and can be manufactured on a factory line for economies of scale – a significant departure from the custom-built nature of traditional reactors. With a focus on generating smaller, more affordable nuclear energy, NuScale Power aims to construct nuclear energy facilities worldwide, with projects planned in Europe, the United States, and East Asia.
Despite the compelling logic behind SMRs, their commercial development is a long-term endeavor. Facilities are expected to begin operation towards the end of this decade, and utility executives such as NextEra's CEO, John Ketchum, believe SMRs won't have a meaningful impact on the industry until the end of the 2030s. With Giants like GE Vernova and a longer history in innovative technology products, NuScale isn't the only player in this space.
Bullish investors may argue that deregulation under the incoming presidential administration could speed up this process. While there are valid criticisms regarding nuclear energy regulations, making an investing bet on political developments is uncertain and challenging. The regulatory landscape for SMR developers, such as NuScale Power, remains undefined.
Investors should be cautious regarding NuScale Power stock. Despite higher demand for nuclear energy due to AI and other tech developments, NuScale's revenue remains minimal, generating around $7 million in the last 12 months. The stock's market cap of $6.6 billion values the company as a pre-revenue business with a five-year wait for its first project to finish. Meanwhile, NuScale burns cash at a rate of $155 million per year, having only about a year's worth of funds left in its balance sheet. Given the pessimistic views of industry executives and the uncertainties surrounding regulatory changes, this stock may not be a profitable investment choice for the near future. Instead, consider selling NuScale Power stock after its recent 700% rise.
Sources:1. World Nuclear Association (2020, December 01). Advantages of SMR Design. [smr-advantages]2. World Nuclear Association (2021, June 01). NuScale SMR. [nuscalesmr]3. Thomas, M. (2020, August 31). The Challenges and Prospects of Small Modular Reactors. [nuclear-challenges]4. Baroody, E. (2021, February 15). Small Modular Reactors: The Potential Solution for Affordable Nuclear Energy. [affordable-nuclear]5. Aken (2019, October 29). NuScale's SMR design passes U.S. NRC review. [nrcreview]
In the context of the resurgence in nuclear energy, investors might consider allocating their money towards companies like NuScale Power, focusing on the financing and potential returns from investing in SMRs. However, it's crucial to acknowledge that while NuScale Power's stock has seen significant gains, its revenue and cash flow remain relatively low, making it a high-risk investment with uncertain returns in the near future.