NuScale Power(NYSE: SMR) isn't a household name. That's not shocking since it has a fairly small market cap of around $1.7 billion and doesn't have a product to sell yet.
The interesting thing with this nuclear power stock is that these two facts could be seen as a reason to buy shares and, at the same time, a reason to sell them. Here's a look at the buy, sell, or hold call on NuScale Power.
There's one big reason not to buy NuScale Power
NuScale Power is trying to establish a business building small-scale modular nuclear reactors. It currently doesn't have a product to sell and won't until regulators give its reactor plans their blessing.
While most nuclear reactors have operated safely for years, the few times when something has gone wrong have been very big events. Three Mile Island, Chernobyl, and Fukushima were massive, globally watched disasters (or near disasters in the case of Three Mile Island). Regulators are very strict about the safety of the nuclear power industry.
Image source: Getty Images.
At this point, NuScale Power has its plans in with U.S. regulators. There are still more hoops to jump through before the company can even consider building the products it hopes to sell. The next round of approvals may come in the middle of 2025, according to NuScale Power. In the meantime, the company continues to spend a lot of money on the development of its design while bringing in very little in revenue.
The losses it has been incurring won't suddenly turn into profits after the company gets the approvals it needs. If NuScale Power receives these regulatory approvals, it then has to build out its manufacturing facilities. If you can't handle owning a company that's still in the very early stages of development, you should not buy or own NuScale Power. It's a high-risk stock with lots of business uncertainty.
There are two reasons to buy and own NuScale Power
That said, if you're an aggressive investor, you might want to consider NuScale Power, which means buying it and continuing to hold it if you already own it. Both relate to the same thing -- nuclear power.
Although nuclear power fell out of favor after the Fukushima disaster in 2011, the view of the energy source has dramatically changed -- and for good reason. Nuclear power doesn't create greenhouse gasses, putting it on par with clean energy sources like solar and wind. However, unlike those intermittent renewable power options, nuclear power is always on. That makes it a good source of base-load power that can be used to supplement solar and wind.
There are a number of large technology companies that are backing nuclear power plants because of this. The list notably includes Microsoft, Alphabet, and Amazon. These companies have very deep pockets to match their very big ambitions. If you want to invest along with them, NuScale Power is a way to do that.
That said, you could buy other nuclear power stocks and achieve the same end. What makes NuScale Power stand out is that its modular nuclear reactor design could solve many of the problems with the current large nuclear reactors that dominate the industry.
Modular reactors are expected to be safer to build and operate, cheaper to construct, and easier to place where they're needed. NuScale Power's product, if it gets approved and built, would be an elegant solution to some of the nuclear power industry's biggest negatives, and that could make it a real hit with customers.
If you believe that NuScale Power has the right product (small-scale modular reactors) and will be available at the right time (during what appears to be a nuclear renaissance), buying and holding the company's stock makes complete sense. However, it's probably best for aggressive investors. More conservative types, even if they take a glass-half-full view of things, will probably be better off waiting until NuScale Power has achieved a few more milestones, such as having an approved reactor design.
NuScale Power is exciting, which is negative and positive
NuScale Power's stock price has risen over 450% so far in 2024. That's a huge advance and prices in a lot of good news.
But if the company gets approved to build small-scale modular nuclear reactors and can build out its manufacturing facilities, there could be a big business here. If it stumbles anywhere along the way, it could still flame out. You have to believe strongly that it will succeed if you want to buy or own this small nuclear power upstart.
Should you invest $1,000 in NuScale Power right now?
Before you buy stock in NuScale Power, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NuScale Power wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $813,567!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 28, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends NuScale Power and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
