NuScale Power shares climb on UK nuclear funding, yet analyst cautions about risks

TLDR

• NuScale Power (SMR) saw an intraday increase of 14.7%, reaching approximately $11.76, followed by an additional 5% rise in after-hours trading.
• This surge was fueled by a UK government funding initiative aimed at expediting the deployment of small modular reactors (SMRs).
• RBC analyst Chris Dendrinos maintains a Sector Perform rating for SMR with a $14 price target, advising caution against pursuing the rally.
• Ongoing class-action litigation concerning ENTRA1 disclosure allegations continues to pose a risk, with a lead-plaintiff deadline set for April 20.
• Over the past 90 days, insiders have divested more than 14 million shares valued at approximately $171 million, notably including a director’s sale of 13.5 million shares.

(SeaPRwire) –   NuScale Power’s stock experienced a 14.7% surge on Wednesday, peaking at $12.02 before closing near $11.76. This upward trend persisted into after-hours trading, where the stock gained an additional 5%. Trading volume was substantial, with approximately 57.5 million shares exchanged, marking an increase of about 119% above the average.

NuScale Power Corporation, SMR

The primary driver was a funding initiative from the UK government aimed at accelerating the deployment of SMRs. While these funds are not directly allocated to NuScale, the announcement significantly uplifted sentiment throughout the nuclear industry. Investors interpreted this as an indication of increased governmental commitment to supporting advanced nuclear projects.

The overall market environment also contributed positively. Investor appetite for risk has recently strengthened, leading to renewed interest in long-term growth prospects such as NuScale. The company’s stock is positioned at the intersection of energy security, decarbonization efforts, and the growing power demands of AI data centers—a confluence of factors that has increasingly appealed to investors.

An announcement regarding a Rolls-Royce SMR contract provided additional momentum, broadly boosting US-listed SMR companies. NuScale profited from both the direct shift in market sentiment and probable short-covering activities.

RBC Urges Caution

RBC analyst Chris Dendrinos remains hesitant to adopt a bullish stance at this time. He recognizes that NuScale is “making incremental progress in the right direction,” but cautions that the path to a Final Investment Decision (FID) is “protracted.” He maintained his Sector Perform rating and slightly reduced his price target, simultaneously increasing his discount rate assumptions to account for execution risks.

Dendrinos highlights that NuScale’s prospects are significantly contingent on external factors, primarily project approvals and third-party financing. Prolonged timelines elevate the potential for equity dilution and complicate the confident valuation of the stock. While his $14 price target still suggests approximately 20% upside from current prices, he advises against pursuing the stock at its present valuation.

The overall analyst sentiment is varied. The consensus among analysts includes 5 Buy ratings, 6 Hold ratings, and 1 Sell rating—resulting in a Moderate Buy recommendation overall—with an average price target of $17.39, which suggests approximately 48.5% upside potential contingent on improved execution.

Among the more optimistic assessments, Bank of America upgraded the stock to Neutral with a $28 target in January. Texas Capital took an even more positive stance with a Strong Buy rating in late January. Conversely, UBS lowered its target to $13, Canaccord significantly reduced its target from $60 to $25, and Citigroup maintains a Sell rating with an $11.50 target. The overall consensus target is $20.96.

Risks Remain Real

The company’s fundamentals continue to be weak. NuScale reported an EPS of -$0.80 last quarter, significantly falling short of the -$0.10 consensus estimate. Revenue reached $1.81 million, considerably below the anticipated $8.76 million. The net margin stands at -1,130%.

Insider selling has been substantial. The CEO divested 82,667 shares in early March. In April, a director sold 13.5 million shares valued at approximately $163 million. The cumulative insider sales over the past 90 days amount to 14.1 million shares, totaling $171 million. Insiders currently possess only 1.2% of the company’s stock.

Furthermore, class-action litigation is ongoing. Multiple law firms are pursuing claims related to ENTRA1 disclosure allegations, with a lead-plaintiff deadline of April 20. These lawsuits contend that material misstatements were made, which are connected to a previous stock decline of approximately 12%.

The 50-day moving average is positioned at $12.41. The 200-day moving average is at $21.21.