Is Oklo Stock a Buy Now?

Although the stock of nuclear start-up Oklo (NYSE: OKLO) is up more than 350% so far this year, existing shareholders will remember that just a month ago, it was up more than 700% year to date. Over the past month, shares have dropped some 40%, erasing more than $10 billion from the company's market value.

However, Oklo just reported third-quarter earnings, and the report -- along with some additional news the company provided -- makes a compelling case that the stock isn't dead just yet. Here's why the beaten-down energy stock may still be a buy.

A financial report that isn't

Oklo is currently in its pre-revenue or "prototype" phase, meaning it hasn't even begun commercial operations yet. So, unlike established companies, when Oklo's earnings report shows zero revenue and a $36.3 million operating loss -- a loss three times as large as the year-ago quarter -- investors shouldn't be overly concerned. The company's current financials in no way reflect what its financial picture will look like when its business actually starts doing business.

And that day is getting closer and closer. In late September, Oklo broke ground on its first Aurora Powerhouse, the brand name it's given to its small modular nuclear reactor (SMR) facility. Located on the site of the Idaho National Laboratory, this prototype will be Oklo's first opportunity to test its technology under real-world conditions. A successful start-up that generates the anticipated amount of electricity (or more) for the anticipated operating costs (or less) would propel the company and its stock into its next phase of development.

On the other hand, if the SMR underperforms or costs too much to maintain or encounters operational problems, it would be a severe step backwards for the company. That's why, at the moment, Oklo is a very risky and speculative investment. Only investors with high risk tolerance should consider buying shares, and even they shouldn't use money they can't afford to lose.

Additional clarity

Although the earnings report didn't tell us much about Oklo's finances or its eventual commercial prospects, it did contain some important clues about its timeline. Oklo has said that it hoped to have a working prototype of its SMR up and running by late 2027.

The U.S. Department of Energy (DoE), on the other hand, which is supporting Oklo's Aurora Powerhouse build through its Reactor Pilot Program, has stated that the program's goal is to demonstrate criticality in at least three test reactors by America's 250th birthday on July 4, 2026." Oklo suggested that having the DoE's support might help accelerate its initial timeline, but never specifically said whether the July 2026 date was a likely goal.

However, in its Q3 earnings presentation, Oklo slightly altered its description of the RPP's goal to "to demonstrate at least three advanced reactors reaching criticality by July 4, 2026 or as soon as possible under the program." [emphasis mine] This suggests that the company sees the July 4 deadline as unrealistic, although management has stood by its intention to accelerate its timeline, and believes that working under DoE authorization on its Aurora Powerhouse project will help expedite the regulatory process.

Image source: Getty Images.

What investors can expect

Perhaps as a consolation prize for investors hoping for a speedy deployment, Oklo noted that its subsidy Atomic Alchemy -- which was also selected for project support under the RPP -- is "working to achieve [its] stretch target for operations by July 2026." The Atomic Alchemy pilot project is a prototype of a Vertical Isotope Production Reactor (VIPR) that produces neutrons and diverse isotopes for medical, defense, and industrial applications, but not power generation. If the project can achieve its stretch goal, management anticipates it will begin generating early stage revenue within a year.

However, if Oklo is already signaling that a July deadline for its Aurora Powerhouse is off the table, criticality is likely at least a year away, and it won't be until then that investors get the first true sense of whether an investment in Oklo is likely to pay off over the long term.

Now, there will be milestones, announcements, and other events that have an impact on the stock in the meantime, so it's not as though the shares of this start-up aren't going to move. Instead, they seem likely to have plenty of ups and downs as the company's Aurora Powerhouse gets closer and closer to completion, but hopefully will continue on their upward trajectory.

With shares now trading at their lowest level in almost two months, this looks like a good entry point for risk-tolerant investors willing to stomach the volatility over the medium term.

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