NuScale Stock Drops 1.8% Despite Growth Prospects

NuScale Power, a leading U.S. nuclear technology company, has been in the spotlight for its innovative modular reactor technology. The company's stock saw a 1.8% decline on a recent Monday, leading to a "neutral" rating from Citigroup with a target price of $46. Despite this dip, NuScale's stock has shown a remarkable recovery, nearly doubling from its April lows. However, analysts warn that the accumulated short-term gains could lead to a pullback.

Citigroup's analyst Vikram Bagri emphasized NuScale's strategic advantages in the burgeoning demand for electricity, driven by the growth of data centers and artificial intelligence. The company's 77-megawatt modular reactor design, which has received approval but is not yet rated, along with its flexible modular technology and strong supply chain partnerships, positions NuScale favorably in upcoming order competitions. Additionally, NuScale's collaboration with engineering giant Fluor and its independence from the high-purity low-enriched uranium (HALEU) supply chain further bolster its market position.

Bagri also pointed out that the current market price reflects an optimistic expectation of achieving nearly 50 gigawatts of installed capacity by 2040. However, the actual execution of this goal remains uncertain. While new customer contracts could boost stock prices in the short term, the focus will shift to the company's project execution capabilities and fundamental performance as industry competition intensifies and regulatory approvals progress. This discrepancy between expectations and reality could be a significant driver of stock volatility, advising investors to remain cautious amidst the optimistic sentiment.