Why Oklo Stock Dropped Today

Key Points

• Bank of America just downgraded Oklo stock.

• However, it only downgraded to neutral -- and values Oklo stock at $7 more than it costs today.

• BofA thinks the rollout schedule for new nuclear reactors looks "unrealistic."

• 10 stocks we like better than Oklo ›

Shares of Oklo (NYSE: OKLO), a start-up developer of "micro" nuclear reactors that has been soaring ever since President Trump issued executive orders encouraging the development of such reactors earlier this year, turned tail and tumbled 5.5% through 12:25 p.m. ET Tuesday.

You can blame Bank of America for that.

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What BofA says about Oklo

Bank of America removed its buy rating from Oklo stock today, as The Fly reports today, downgrading the nuclear stock to neutral. On the plus side, BofA did give Oklo a $117 price target -- and the stock costs $110 right now!

That sounds a bit weird to me. It gets weirder still once you hear what BofA just said about Oklo's valuation.

According to the analyst, there's "little room for error" in Oklo's current share price -- which, again, is now $7 cheaper than what BofA says is a good price. No wonder that BofA says the "near-term risk/reward [on Oklo stock] skews negative."

Following BofA's advice on Oklo, it seems, will just about guarantee an investor to lose money.

Is Oklo stock a sell?

But it gets worse. According to BofA, at its current valuation, Oklo stock seems to assume that the company will deploy new nuclear reactors at a pace that BofA says is "unrealistic at this stage" of small modular reactor adoption. Granted, long term, BofA is still bullish on nuclear energy. But most analysts think it will be another five years before Oklo starts earning any profit.

When profits lie so far in the future, $110 a share is probably too much to pay, and are not even guaranteed to happen.

Long story short, BofA thinks Oklo stock is a "hold" today -- but Oklo stock still looks like a sell to me.

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Bank of America is an advertising partner of Motley Fool Money. Rich Smith 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.