NuScale Power's Downgrade: Valuation Overreach or a Long-Term Buy?

The recent downgrade of NuScale Power by BTIG to “neutral” from “buy” underscores a critical question for investors: Has the company's stock price raced ahead of its fundamentals, or does its long-term potential as a leader in small modular reactors (SMRs) justify the optimism? The answer lies in navigating the tension between near-term risks and the transformative promise of nuclear energy's next frontier.

The downgrade, announced on June 25, 2025, came as NuScale's shares had surged over 100% since mid-May, fueled by expectations of securing its first U.S. order by year-end. BTIG highlighted two primary concerns: a lack of clarity around orderbook materialization and a valuation that now sits at a stratospheric 92x EV/Sales—a multiple that strains even the most ambitious growth narratives. Analysts argued that while NuScale's achievements, such as the Nuclear Regulatory Commission's (NRC) Standard Design Approval in May, were meaningful, they had already been baked into the stock's rally.

The Case Against Overvaluation

BTIG's skepticism centers on the gap between NuScale's current valuation and its near-term trajectory. With revenue of just $13.4 million in Q1 2025—a mere fraction of the $58 million in consensus 2025 sales estimates—the company's price-to-sales multiple appears precarious. Even if orders materialize, the path to profitability remains uncertain. Operating expenses hit $42.3 million in the quarter, and without a confirmed U.S. customer, NuScale's cash reserves ($491.4 million) could dwindle faster than anticipated.

The firm's valuation also faces a comparison to broader markets. While NuScale's stock doubled in a matter of weeks, the S&P 500 rose just 4% during the same period. This divergence suggests investors may have overdiscounted risks such as supply chain constraints, regulatory hurdles, and the lengthy sales cycle inherent in large infrastructure projects. BTIG's warning is particularly timely given that 53% of NuScale's shares remain unconverted to public stock, leaving the door open for potential dilution.

The Bull Case: SMRs as the Future of Nuclear Energy

NuScale's technology offers a compelling long-term narrative. Its 50-60 MW SMRs, cooled by natural circulation and designed to use conventional nuclear fuel (3%-5% enrichment), avoid the reliance on unproven high-assay low-enriched uranium (HALEU) that plagues some competitors. Cost estimates have fallen to $10 million per megawatt—down from $15 million—making its reactors competitive with renewables in regions with high energy demand.

The global SMR market is projected to grow to $50 billion by 2030, driven by decarbonization mandates and aging power grids. NuScale's first-mover advantage in securing NRC approval, its partnership with Fluor (a seasoned EPC player), and early interest from international customers like Romania's RoPower all suggest a pipeline of opportunities. If even one major U.S. order materializes by year-end—a critical test—the company could achieve positive cash flow by 2026, as BTIG projects.

Navigating the Crossroads

Investors must weigh two timelines: the immediate need for order visibility versus the long-term scalability of SMRs. On one hand, NuScale's valuation demands rapid progress. Without a confirmed U.S. contract by late 2025, skepticism will grow, and the stock could correct sharply. The consensus one-year price target of $29.58—44% below current levels—reflects this risk.

On the other hand, the SMR sector's potential is undeniable. NuScale's design, which can be deployed in clusters of up to 12 reactors, offers flexibility for grids and remote communities. In Europe, where energy security is a priority, and in Asia, where coal-heavy grids are transitioning, NuScale's technology could become a linchpin.

Investment Takeaway

For now, the prudent path is caution. NuScale's valuation requires near-term wins that remain unproven. The stock's current price assumes a best-case scenario—multiple orders, cost overruns contained, and geopolitical tailwinds. Investors should demand tangible progress, such as a signed U.S. contract or a finalized international deal, before reengaging.

However, for those with a multiyear horizon and tolerance for risk, NuScale's role in reshaping nuclear energy could prove transformative. The company's technical edge and partnerships position it to capture a significant share of a nascent but critical market. Until then, the stock remains a speculative play—a bet on execution in a sector where timelines often stretch beyond expectations.

In short: NuScale's downgrade is a reminder that even groundbreaking technologies must deliver. Until they do, patience—and a long view—are investors' best tools.