Oklo Is Down 86% From Its High. Screaming Bargain or More Downside Ahead?

Imagine a punctured balloon that lifts up in the air before sinking to the ground. Or a plane in nosedive, or a yo-yo with a worn-out string. If you can picture that straight drop without the comeback, then, figuratively, you have a good impression of what Oklo (NYSE: OKLO) stock has done over the last 12 months or so.

In figures: an 86% drop. Oof. From $190 a share last October to about $28 as I write this. "Valuation reset" seems euphemistically inadequate to describe the plunge that this once favored nuclear stock has taken.

Speaking plunges, is that screaming that I hear? A screaming buy maybe? Could this downturn be an opportunity to pick up shares of Oklo? Will it ever return to $190? Or will this stock continue to fall?

How Oklo lost 86% of its value in one year

When looking at an 86% decline in stock price, it's easy to think, "Geez, that company must have really dropped the ball." But this company never suffered a catastrophic failure: In all honesty, it was never worth the valuation it had last fall. Indeed, by some standards, the stock still trades at a premium even after shedding a ton of its value.

Around its peak, Oklo had a $30 billion market cap. Given that Oklo had yet to generate revenue from its nuclear powerhouses -- and technically still hasn't! -- $30 billion was not only astronomically high but plainly unsustainable.

This became obvious when the reasons supporting Oklo's sky-high valuation -- mainly, its nuclear reactor design would one day become the preferred juice of AI data centers -- turned. Wall Street stopped buying the hype as investors began to realize that certifying and building nuclear reactors takes time. A lot of time. And that rude awakening has made many nuclear stocks like Oklo less attractive.

That's not to say that Oklo is all hype, or is doomed to crumble. But the conflict between AI companies needing power now, and the years of work remaining ahead of Oklo before its first reactor will turn on, has become too uncomfortable for many investors.

Image source: Oklo.

My verdict: Buy if you can stay invested for the long term

I'm an investor in Oklo, and I plan to stay invested for the long term. I like Oklo's leadership -- both of its co-founders studied nuclear engineering at MIT, where their ideas for Oklo began to take shape -- and the market is ready for clean energy solutions like Oklo's. But I don't think this stock is right for everyone, and I wouldn't recommend it universally.

Unless you're investing aggressively for growth, and you have a long time horizon ahead of you, Oklo might not be the right stock for you. This company needs time, more time than Wall Street has priced in. While the sell-off has been brutal, this stock could fall further, especially if investors continue to sour on nuclear.

My belief is that small reactors will become an integral part of energy generation in the future, which is why I continue to hold Oklo today. If you can also stay invested for a decade or longer, a small position might be worthwhile, but only if you can afford the risk.

Steven Porrello has positions in Oklo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.