NuScale Stock Is Down 83% -- Bargain or Trap? The Honest Answer Will Surprise You.
Key Points
NuScale stock has fallen sharply on a spate of negative news.
The company lacks a firm first sale, has lost a big long-term shareholder, and is burning cash.
The stock is a high-risk, high-reward play on the future of power, and it might not be the right investment for every investor.
- 10 stocks we like better than NuScale Power ›
NuScale Power's (NYSE: SMR) stock has plummeted, to say the least. Put differently, NuScale investors who bought shares at its 52-week high of $57 have seen their investment drop about 83%. That's enough to make anyone, whatever their risk tolerance, lose their patience.
NuScale now trades at a sub-$10 price, yet it still carries a roughly $4 billion market cap. That puts this small modular reactor (SMR) developer in the mid-cap range, even though its business, unproven and unprofitable, looks more like an early-stage start-up than a mid-sized company.
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I would not, therefore, call NuScale a bargain; nor, however, would I call it a trap.
Image source: Getty Images.
I would call NuScale a beaten-down nuclear stock, one that was formerly riding highs on a purely emotional wave of exuberant speculation, and is now trading closer to its actual value -- perhaps still even above its actual value -- due to a torrent of negative news and investor impatience.
That negative news includes:
- Having almost no revenue (about $75,000 last quarter).
- The loss of its longtime shareholder, Fluor.
- The lack of a firm first sale.
- A massive $750 million share sale that could further dilute shareholders.
Add to that a $506 million milestone payment to its partner, ENTRA1 Energy, for setting up a potential deployment of NuScale's SMRs with Tennessee Valley Authority (TVA), and it's surprising this stock still trades in the mid-cap range.
True, a lot of negative news has already been priced in, which could create an outsize reaction should any positive news emerge. But if investors are looking at NuScale in the long term, an uncomfortable amount of uncertainty continues to obscure any proper perspective on its true value.
At the end of the day, NuScale is a high-risk, high-reward play on nuclear energy. If you're at all averse to that risk, a nuclear energy exchange-traded fund (ETF) could help you capitalize on the same trend with broader exposure.
Should you buy stock in NuScale Power right now?
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Steven Porrello 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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