Over the past year, American nuclear reactor manufacturer NuScale Power (SMR) has seen its stock price balloon by 391% to $42.40. As of 10:32 a.m. EDT in U.S. trading hours on Wednesday, the stock also jumped by more than 13%. Since the start of this year alone, the shares have skyrocketed by nearly 134%.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 55% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The stock is also enjoying higher-than-normal trading activity among options traders, with over 57,700 contracts traded as of Tuesday. The majority of traders (75%) are bullish, betting on the company’s stock shooting up further.
The question then is: why is NuScale Power gaining this momentum? The graph below shows how the company’s performance compares to other publicly traded firms in the space.
Advanced Economies Race for Nuclear Energy Dominance
One key factor likely fueling the surge is the shift in nuclear policy in advanced economies. In late May, President Donald Trump signed four executive orders targeted at “reinvigorating” America’s nuclear industry, seeing as the nation’s “nuclear fuel cycle infrastructure has severely atrophied.”
The orders focus on promoting the rapid development and deployment of advanced nuclear technologies, including small modular reactors (SMRs), microreactors, and Generation IV reactors. The goal is to establish America’s energy dominance and energy independence in the future.
SMRs, also known as “mini nukes”, are NuScale Power’s area of expertise. They are small-sized nuclear reactors that can generate up to a third of the electricity produced by traditional large nuclear plants. They can be factory-built and transported to installation sites for assembly.
The UK also wants in on SMRs to meet its growing electricity demands and has dedicated about £2.5 billion to that end. In June, the British government awarded industrial manufacturer Rolls-Royce (RYCEY) the contract to develop and build its first small nuclear power stations.
Already, NuScale Power has received the Standard Design Approval (SDA) for the upgraded version of its SMR that can produce 77 megawatts of electricity. SDA is a formal certification by the U.S. nuclear regulator that the reactor design meets safety and regulatory standards.
In addition, NuScale Power is set to benefit from the new deal between energy developer ENTRA1 and the Tennessee Valley Authority (TVA), a U.S. public utility. The former will use NuScale Power’s modules in designing up to six gigawatts of new nuclear energy capacity for the TVA.
Banking giant UBS (UBS) has called the deal a major upside for NuScale Power. The Bank of America (BofA) (BAC) also took cognisance of the size of the deal, noting that it is the largest SMR power commitment by a public electricity provider in U.S. history. BofA added that the planned capacity could power 4.5 million homes.
Is NuScale a Good Stock to Buy?
However, despite their positive views of the deal, both UBS and BofA on Wednesday gave SMR stock a Neutral rating, with the same price target of $38.
UBS acknowledged the potential of the new deal to attract reliable customer support and enhance the chances of commercializing the company’s design. However, the banker opted for caution as it waits for more clarity on the terms of the deal.
Similarly, BofA attributed its rating to stagnant customer interest. The firm noted that “the defining question is whether SMRs can deliver competitive costs.” It added that credibility in the industry was shifting from design approvals to customer patronage and that “only a few developers are passing that test.”
On TipRanks, NuScale’s stock has a Moderate Buy consensus recommendation based on three Buys and seven Holds by 10 Wall Street analysts. The average SMR price target is $39.43, indicating a potential 6.72% downside risk.
