Nuclear Energy “Renaissance”: Should You Buy NuScale Power Stock?

The Motley Fool, By Brett Schafer – Oct 27, 2024

Key Points

The stock is incredibly risky at the moment.

NuScale Power stock is up close to 500% this year.

The company wants to disrupt the energy market with small modular reactors.

Companies are betting big on nuclear energy to power AI…………..

Tens of billions are going to be spent on nuclear power in the next few decades, but there are few publicly traded nuclear energy stocks one can buy. One, NuScale Power Corp (SMR -0.68%), plans to disrupt the market with its new small modular reactors (SMRs). Its shares are up close to 500% this year as investors pile into the nuclear energy trade. Should you follow them and buy some shares yourself?

………………………NuScale won’t generate meaningful revenue for years

The problem is, NuScale Power is far from this reality. The company has never sold an SMR and has virtually zero revenue today. Many companies in multiple countries have proposed deals with NuScale, but none are operational and, if they ever get built, they won’t be ready until 2030 or later. That is over five years until NuScale Power is generating any form of revenue, let alone profits.

Given all the upfront costs in research and development, Nuscale is currently burning a lot of cash. Over the last 12 months, its free cash flow was negative $170 million. That is more than the cash it holds on the balance sheet ($130 million). What this means is NuScale is set to run out of money within a year but needs over five years of runway — if not more — before getting its SMRs commercialized. Management is going to need to raise money in the form of stock offerings or debt to bridge the gap between this cash burn and the time when its SMRs finally get sold.

The stock is shaky, at best

Investors in NuScale Power are thinking all about the upside of SMR technology right now. That is why the stock is up close to 500% in less than 12 months. However, there is a lot of potential downside that they may be forgetting right now, and that is how investors can get in trouble.

For one, it trades at a market cap of $1.7 billion and has zero revenue. Shareholders are likely going to be weighed down by stock offerings or debt, which will need to happen within the next 12 months. This will present a headwind to long-term shareholder returns.

Two, we don’t even know if the SMR technology will work. It isn’t proven, and it is unclear whether utilities want these solutions or the older large nuclear reactors. The idea of SMRs makes sense, but it is only an idea. And ideas don’t generate positive cash flow.

NuScale Power is a pre-revenue business burning a ton of cash that will likely stay pre-revenue through 2030. Even though the stock is soaring, smart investors will stay far away from this risky stock. There are better places to store your money right now. https://www.fool.com/investing/2024/10/27/nuclear-energy-renaissance-should-you-buy-nuscale/?fbclid=IwY2xjawGQ6g9leHRuA2FlbQIxMQABHTdbZQF5x3-PErplyYXEJmIRC-1UX_k9hjjgDgdnSdU8KfJLMojZSpSrlQ_aem_felvtV_-cil14iXalVC_yg