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NuScale Power Trades Below $6 With the Only NRC-Certified Small Modular Reactor Design. Here's Why That Still Isn't Enough.
Key Points
NuScale's small modular reactor has design approval from the U.S. Nuclear Regulatory Commission.
The upstart company will need to secure a binding power purchase agreement in the near future.
NuScale's revenue was just $75,000 in its latest quarterly report -- woefully short of estimates.
NuScale Power (NYSE: SMR) has a real competitive advantage. It's the only small modular reactor (SMR) provider with design approval from the U.S. Nuclear Regulatory Commission (NRC). Its components are already in commercial production.
But Wall Street isn't showing NuScale any love. The company hasn't secured any binding commercial power purchase agreements for a full-scale power plant. This is a big problem.
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NuScale does have a partner in ENTRA1 Energy and a non-binding agreement with the Tennessee Valley Authority for up to 6 gigawatts of capacity. The SMR company is also still working on meeting conditions in a Romanian RoPower project, but other than that, NuScale is desperate for a binding commercial agreement.
NuScale's second-quarter revenue was just $75,000; the consensus estimate was nearly $9 million. The net loss widened from $37.6 million to $50.1 million. The good news is that NuScale has a lot of cash and no debt. The company is carrying almost $2 billion in cash and equivalents on the balance sheet.
Image source: The Motley Fool.
Still, the problems don't end there. NuScale is facing a class action lawsuit alleging the company misled investors about the capabilities of its partner, ENTRA1. Multiple shareholder rights firms are also investigating whether NuScale committed securities fraud. NuScale has denied any wrongdoing. This reputational damage could also be hindering its ability to close a much-needed nuclear deal. So while the NRC design approval is a huge plus, there are far too many other headwinds facing NuScale.
While the stock is trading below $6 as of this writing, investors would be best served waiting on the sidelines until the company's legal issues are resolved and a revenue stream is secured.
Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.