Target price cut to $18.50! Citi is shorting NuScale Power (SMR.US): Short-term benefits cannot hide contract and revenue risks

The Zhitong Finance App learned that Citi reaffirmed the “sell/high risk” rating of the small modular reactor company NuScale Power (SMR.US) and drastically lowered its target price from $37.50 to $18.50 on the grounds that the company is facing contractual uncertainty and revenue pressure.

Citi analyst Vikram Bagri pointed out that as the only nuclear energy company to receive approval from the US Nuclear Regulatory Commission for a small modular reactor design, NuScale has significant regulatory approval and time advantages, and has gained a first-mover advantage in the industry against the backdrop of growing electricity demand driven by data centers and artificial intelligence (AI). However, the company still faces significant project execution risks, and its stock price seems to have taken into account a large number of installed capacity expectations before 2040 in advance, which is not commensurate with the expected increase in global nuclear power capacity.

The analyst said that in the short term, there may be favorable factors driving the company's stock price higher, but in the long run, revenue pressure will continue to show. On the one hand, revenue related to existing contracts is declining. On the other hand, partner FLR.US (FLR.US) continues to reduce its holdings and cash out, and NuScale needs to issue additional shares to fulfill payment commitments. Additionally, Bagri delayed the estimated sales of the company's first nuclear power module by two years, and believes it is unlikely that the company will sign a definitive contract with the US Tennessee Valley Authority in the short to medium term.

NuScale shares closed down 4.69% by Wednesday's close.