NuScale Power Trades Near $8. Here's What Has to Happen for It to See $20 Again.

Over the past three years, NuScale Power's (NYSE: SMR) stock price has ranged from $2 to $53 per share. Today, it sits at a little under $8. Owning it has been a roller-coaster ride, with five drawdowns of 50% or more over that span. The current drawdown is the worst of them, at roughly 85%. That said, there's a clear event that could prompt investors to rethink their views of NuScale Power.

What happened to NuScale Power's stock?

The interesting thing about NuScale Power's huge price swings is that they aren't really driven by its business. That 85% decline didn't happen because of some terrible corporate disaster; it happened because investors got overly enthusiastic about nuclear power stocks, and then moved on to other things. NuScale Power, a nuclear power start-up at the leading edge of nuclear technology, simply went along for the ride.

Image source: Getty Images.

The technology NuScale Power is working on is small modular nuclear reactors (SMRs). It could be a game changer for the nuclear industry, as factory-built SMRs could be less costly, safer, and easier to place near where they are needed than current large-scale reactors. But the hard truth is that NuScale Power hasn't even built its first commercial SMR yet. It has an approved reactor design, which is a very big deal, but it still needs to find the first customer willing to sign on the dotted line.

To the company's credit, it is working hard to ink that first sale. It has been working with the Romanian power company RoPower for quite some time and is seeing material success. RoPower has approved a project that would use six NuScale Power SMRs. But RoPower still needs to nail down project financing, so there's no agreement yet. NuScale Power is also working closely with ENTRA1 Energy and the Tennessee Valley Authority in hopes of being part of what could be "the largest nuclear power deployment program in U.S. history." But, like RoPower, there is still no deal yet.

NuScale Power needs to sell an SMR

So, what the market is likely waiting for is NuScale Power's first SMR sale. That could be the event that pushes the stock back toward $20. However, it is important to remember that a signed contract is really just the start of the next stage of the company's development. Once it has that contract, it still needs to prove it can build an SMR and that the SMRs it builds are reliable and safe. In other words, NuScale Power is a high-risk start-up, and that isn't likely to change for quite some time.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.