Prediction: NuScale Power Stock Is a Buy Before August

NuScale Power (NYSE: SMR) -- one of the market's most popular nuclear energy stocks -- is expected to report its second-quarter earnings sometime in early August. I don't expect any major announcements. But I do expect an update on a critical growth catalyst that could revive the company's struggling stock price.

NuScale is seeking a power purchase agreement this year

NuScale has an exciting business model, one that is benefiting directly from some powerful growth tailwinds. Global electricity demand is rising due to the rapid growth of AI technologies, which rely on energy-intensive data centers to operate. At least on paper, nuclear power is a great way to meet this growing demand with a clean energy source that can generate plenty of reliable baseload power.

There's just one problem: Conventionally sized nuclear power plants can take a decade or longer to build. That's why NuScale is focused on small modular reactors, or SMRs.

"When compared to traditional, large-scale [nuclear power plants], SMRs require less land, shorter construction periods, and have enhanced safety features," observes a report from Bank of America. Only two SMRs currently operate worldwide. But more than 80 are currently in some sort of development -- a jump fueled by the ongoing AI data center build-out.

Image source: Getty Images.

NuScale has yet to get an SMR system online. That's understandable given the industry as a whole remains relatively immature. While faster to build than conventional nuclear power plants, SMR systems will still likely take two to five years to build.

NuScale, however, may soon make the biggest leap yet in its journey to build an actual SMR. In September, the company announced a landmark deal to build a 6 gigawatt SMR system for the Tennessee Valley Authority, a federally owned utility corporation. At the time, NuScale's share price hovered around $34. Today, NuScale's stock price is closer to $10, largely because we have yet to see any real traction in the deal since it was signed.

This lack of traction, however, should change soon. In May, NuScale CEO John Hopkins announced that he expects a power purchase agreement (PPA) by the end of 2026. I expect Hopkins to give an update on this prediction on the next quarterly earnings call in August. If there's positive news, we could finally see NuScale stock begin to recover. After all, the resolution of a PPA agreement locks the Tennessee Valley Authority into buying power from NuScale's SMR system over the long haul, vastly improving the odds that construction will begin in 2027.

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