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The underperformance in SMR shares can be attributed to modest top-line growth expectations in 2024. It reported unimpressive second-quarter 2024 results, with revenues of $1 million and a loss of $74.4 million. This was lower than the year-ago quarter’s revenues of $5.8 million and widened from a net loss of $29.7 million. On a sequential basis, revenues were down ($1.4 million in the first quarter) and net loss widened ($48.1 million).
It has received authorization from RoPower for the Phase 2 Front End Engineering and Design ("FEED Phase 2") project for the Doicesti small modular reactor plant at a former coal plant site in Doicesti, Romania, which is a noteworthy development.
SMR has executed a revenue-generating agreement with RoPower in relation to the advancement of this project. Over the next 12 months, NuScale expects additional revenues from its parent Fluor Corporation with respect to its continued contribution toward this project.
Nevertheless, NuScale’s near-term prospects are not that bright, given lack of revenue generating opportunities.
Hence, the recent dip in its share price brings this question into investors’ minds - is it the right time to jump into the stock, or should we wait for a better entry point?
SMR Underperforms Sector in the Past Month
Image Source: Zacks Investment Research
Data Center Power Demand to Boost SMR Stock’s Prospects
NuScale offers a modular, scalable 77-megawatt (gross) electric Light Water Reactor nuclear power plant using exclusive rights to a nuclear power plant design obtained from Oregon State University. It expects to achieve Standard Design Approval by mid-2025.
Its long-term prospects ride on the strong demand for continuous power required to support data centers. Data Centers are expected to consume 9.1% of the U.S. Power Consumption in 2030 compared with 4% in 2023.
SMR has cited Goldman Sachs’ forecasts that expect a 15% CAGR in U.S. data center power demand through 2030. Major hyperscalers — Amazon (AMZN - Free Report) , Google, Meta Platforms (META - Free Report) and Microsoft (MSFT - Free Report) — expect to continuously expand their spending on data centers to support various AI-related initiatives over the long term.
While AMZN plans to spend an additional $150 billion on data center facilities over the next 15 years to maintain its cloud services domination, Google will spend more than $100 billion developing AI technology and strengthening its computing power. META plans to spend $37 to $40 billion in capital expenditures in 2024 to support its AI initiatives.
The growing need for renewable energy that offers steady power without the risk of grid intermittency caused by unreliable sources like wind and solar is proving beneficial for SMR. It believes that advanced nuclear technology is the only solution that can help the United States achieve its 2050 net-zero emissions goal. To attend the target, the U.S. Department of Energy needs a capacity of 200 gigawatts.
SMR’s Earnings Estimate Steady, Top Line to Decline Y/Y
The Zacks Consensus Estimate for third-quarter revenues is pegged at $6.18 million, indicating a year-over-year decline of 11.08%.
The consensus mark for third-quarter earnings is pegged at a loss of 11 cents per share, unchanged over the past 60 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $20.4 million, indicating a year-over-year decline of 10.57%.
The consensus mark for 2024 earnings is pegged at a loss of 55 cents per share, steady over the past 30 days.
SMR stock is overvalued at this moment, as suggested by the Value Score of F.
NuScale stock is trading at a significant premium with a trailing 12-month Price/Sales (P/S) of 52.61X compared with its median of 20.76X and the industry’s 2.92X.
P/S Ratio (TTM)
Image Source: Zacks Investment Research
Technical indicator is bearish for NuScale as the shares trade below the 50-day moving average, which indicates downward momentum.
What Investors Should Do With SMR Stock?
SMR’s nuclear power technology has strong long-term prospects, given the rising demand for power for data centers and clean energy for industrial processes. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.
Image: Bigstock
NuScale Power Down 20.3% in a Month: Is SMR Stock a Buy on the Dip?
NuScale Power (SMR - Free Report) shares have plunged 20.3% in the past month, underperforming the Zacks Computer & Technology sector’s growth of 0.3% and the Zacks Electronics- Power Generation industry’s fall of 5.7%.
The underperformance in SMR shares can be attributed to modest top-line growth expectations in 2024. It reported unimpressive second-quarter 2024 results, with revenues of $1 million and a loss of $74.4 million. This was lower than the year-ago quarter’s revenues of $5.8 million and widened from a net loss of $29.7 million. On a sequential basis, revenues were down ($1.4 million in the first quarter) and net loss widened ($48.1 million).
It has received authorization from RoPower for the Phase 2 Front End Engineering and Design ("FEED Phase 2") project for the Doicesti small modular reactor plant at a former coal plant site in Doicesti, Romania, which is a noteworthy development.
SMR has executed a revenue-generating agreement with RoPower in relation to the advancement of this project. Over the next 12 months, NuScale expects additional revenues from its parent Fluor Corporation with respect to its continued contribution toward this project.
Nevertheless, NuScale’s near-term prospects are not that bright, given lack of revenue generating opportunities.
Hence, the recent dip in its share price brings this question into investors’ minds - is it the right time to jump into the stock, or should we wait for a better entry point?
SMR Underperforms Sector in the Past Month
Image Source: Zacks Investment Research
Data Center Power Demand to Boost SMR Stock’s Prospects
NuScale offers a modular, scalable 77-megawatt (gross) electric Light Water Reactor nuclear power plant using exclusive rights to a nuclear power plant design obtained from Oregon State University. It expects to achieve Standard Design Approval by mid-2025.
Its long-term prospects ride on the strong demand for continuous power required to support data centers. Data Centers are expected to consume 9.1% of the U.S. Power Consumption in 2030 compared with 4% in 2023.
SMR has cited Goldman Sachs’ forecasts that expect a 15% CAGR in U.S. data center power demand through 2030. Major hyperscalers — Amazon (AMZN - Free Report) , Google, Meta Platforms (META - Free Report) and Microsoft (MSFT - Free Report) — expect to continuously expand their spending on data centers to support various AI-related initiatives over the long term.
While AMZN plans to spend an additional $150 billion on data center facilities over the next 15 years to maintain its cloud services domination, Google will spend more than $100 billion developing AI technology and strengthening its computing power. META plans to spend $37 to $40 billion in capital expenditures in 2024 to support its AI initiatives.
The growing need for renewable energy that offers steady power without the risk of grid intermittency caused by unreliable sources like wind and solar is proving beneficial for SMR. It believes that advanced nuclear technology is the only solution that can help the United States achieve its 2050 net-zero emissions goal. To attend the target, the U.S. Department of Energy needs a capacity of 200 gigawatts.
SMR’s Earnings Estimate Steady, Top Line to Decline Y/Y
The Zacks Consensus Estimate for third-quarter revenues is pegged at $6.18 million, indicating a year-over-year decline of 11.08%.
The consensus mark for third-quarter earnings is pegged at a loss of 11 cents per share, unchanged over the past 60 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $20.4 million, indicating a year-over-year decline of 10.57%.
The consensus mark for 2024 earnings is pegged at a loss of 55 cents per share, steady over the past 30 days.
NuScale Power Corporation Price and Consensus
NuScale Power Corporation price-consensus-chart | NuScale Power Corporation Quote
SMR Shares Overvalued
SMR stock is overvalued at this moment, as suggested by the Value Score of F.
NuScale stock is trading at a significant premium with a trailing 12-month Price/Sales (P/S) of 52.61X compared with its median of 20.76X and the industry’s 2.92X.
P/S Ratio (TTM)
Image Source: Zacks Investment Research
Technical indicator is bearish for NuScale as the shares trade below the 50-day moving average, which indicates downward momentum.
What Investors Should Do With SMR Stock?
SMR’s nuclear power technology has strong long-term prospects, given the rising demand for power for data centers and clean energy for industrial processes. Hence, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.
NuScale currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.