Why Did NuScale Power Stock Pop Today?
Key Points
Finland just suffered a nuclear incident.
Nuclear stocks are up today despite it (or because of it?)
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NuScale Power (NYSE: SMR) stock, a start-up manufacturer of small modular (nuclear) power reactors, surged 12.9% through 12:40 p.m. ET Friday -- apparently on no good news at all.
Actually, the opposite: Reports today say a technical fault at the Olkiluoto Nuclear Power Plant in Finland caused one of the site's three units, "OL2," to shut down temporarily today.
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Image source: Getty Images.
Traditional nuclear versus SMR
Is this bad news for nuclear power investors? Maybe, but it's not terribly bad news.
News site "Mezha" reports "an update of the power management system software" caused the "unplanned unavailability" of the reactor, but this should last no more than 16 hours. The reactor shut down as designed, "the incident did not compromise the facility's safety, and the other units at the plant continue to operate normally."
Might investors be reading this news and thinking, "Anything bad for traditional nuclear reactors could be good news for the adoption of SMRs?" Perhaps. Still, you'd be more likely to expect an incident like this to spook nuclear power investors than excite them.
From that perspective, a near-13% gain in NuScale's stock price on the Finnish news probably speaks more to irrational exuberance about nuclear power stocks than to investors correctly interpreting whether the news was "good" or "bad."
Is NuScale stock a buy?
NuScale's rising stock price also doesn't speak highly of investors' ability to properly gauge the risk of investing in expensive, unprofitable nuclear stocks. On the one hand, yes, NuScale may be the only SMR stock currently booking revenue from this business. However, with no profits forecast before 2030, there's ample time for things to go wrong with NuScale stock, and still no profits or free cash flow to support it in the meantime.
Investors beware: This nuclear engine is running solely on momentum.
Should you buy stock in NuScale Power right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
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