NuScale Power Stock Tumbles From All-Time Highs in October. What's Next?

Shares of NuScale Power (NYSE: SMR) surged to an all-time high of $57.42 on Oct. 16 but then fell nearly 16% in the second half of October. The nuclear energy stock, however, still ended the month up 24.6% according to data provided by S&P Global Market Intelligence, thanks to its solid run-up in the earlier days, driven by a big announcement from the U.S. Department of Defense.

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NuScale Power's opportunities are expanding

NuScale Power is developing small modular reactors (SMRs) and is the only company to have received design approvals from the U.S. Nuclear Regulatory Commission. So every time the U.S. government announces initiatives focused on the nuclear energy industry, particularly small reactors, NuScale Power stock rises in anticipation of potential contract wins for the company.

That's what happened in October when the U.S. Army unveiled a next-generation nuclear power program called the Janus Program.

The Janus Program aims to secure a steady and reliable supply of power across defense installations to support critical missions. To do so, it plans to deploy nuclear microreactors at military bases worldwide. Small reactors can be installed at remote locations that are not feasible for traditional nuclear reactors and can generate uninterrupted power for years without the need to refuel.

Although the U.S. Army will build and test the small reactors jointly with the Defense Innovation Unit and the Department of Energy, it wants the reactors to be owned and operated commercially. That means companies like NuScale Power have an opportunity to partner with the Army. With the Janus Program also validating the feasibility and potential of SMRs, NuScale Power stock surged by double digits after the announcement.

In another big October development, NuScale Power announced that its exclusive partner ENTRA1 Energy could receive up to $25 billion in funding under the new $550 billion U.S.-Japan Framework Agreement.

This funding will one of the biggest milestones for NuScale Power, as ENTRA1 is also its exclusive commercialization partner, developing energy plants powered by NuScale's SMR technology. This opportunity comes close on the heels of ENTRA1 signing an agreement to deploy up to 6 gigawatts of nuclear power capacity using NuScale's SMRs to the Tennessee Valley Authority across seven states.

This big competitive advantage could support NuScale stock in the long term

NuScale Power stock has continued to fall since mid-October and is down more than 40% since, as of this writing. Investors booked profits in the stock as NuScale's revenue of $8.2 million for the third quarter fell short of analysts' estimates. The company currently generates revenue from engineering services provided to the RoPower nuclear project in Romania. NuScale also reported a big loss of $273 million for the quarter.

I wouldn't read much into NuScale's numbers, though, as the company has yet to commercialize its first SMR. Investors should focus on NuScale's regulatory milestones, partnerships, and financial health, all which of which appear to be on track. Fluor's (NYSE: FLR) backing as a majority stakeholder provides financial stability that other start-ups often lack, and that's one of the biggest competitive advantages for NuScale Power and its stock.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.