HSBC initiates Nuscale Power stock with Hold rating on execution risk

Investing.com - HSBC initiated coverage on Nuscale Power (NYSE:SMR) with a Hold rating and a price target of $13.00, citing regulatory progress offset by execution uncertainties. The stock currently trades at $13.57 with a market capitalization of $4.66 billion, though InvestingPro analysis suggests the shares are slightly overvalued relative to Fair Value estimates.

The company has received U.S. Nuclear Regulatory Commission standard design approvals for both its 50 MW and uprated 77 MW modules, which reduces risk for global deployment of its small modular reactor technology. The regulatory lead improves project bankability and positions NuScale to capture domestic and international opportunities amid rising power demand from AI data centers.

NuScale’s capital-light model of licensing its technology and providing pre- and post-construction services leaves the company dependent on customers for execution pace. The company’s technology has been selected for Europe’s first small modular reactor, with Romania advancing a six-module system totaling approximately 462 MW to the pre-EPC stage.

The Doicești project costs an estimated $6 billion to $7 billion, with a phased development structure committing initial funding to only one 77 MW module for 2030 at the earliest. NuScale books pre-construction service revenue from the Romania project this year. According to InvestingPro Tips, the company holds more cash than debt on its balance sheet and maintains a strong current ratio of 4.3, providing financial flexibility as it pursues these capital-intensive projects. Analysts anticipate significant sales growth of 153% in the current year, though the company remains unprofitable with revenue of $31.48 million over the last twelve months.For deeper insights into NuScale’s financial health and growth trajectory, investors can access the comprehensive Pro Research Report, available for this stock and 1,400+ other US equities on InvestingPro.

The company may be required to provide a second milestone contribution to ENTRA 1 as it advances a power purchase agreement with the Tennessee Valley Authority. The agreement to deploy up to 6 GW of new nuclear power generation capacity supports U.S. deployment prospects and should drive steady revenue longer term, but may require NuScale to raise additional upfront capital for higher general and administrative costs. The stock has experienced significant volatility, falling 64% over the past six months with a beta of 2.28.

In other recent news, NuScale Power Corporation has announced an expansion of its fuel manufacturing partnership with Framatome. This development will now include European facilities, with Framatome fabricating fuel assemblies for NuScale’s European small modular reactor customers. Meanwhile, the Richland, Washington facility will manufacture fuel for U.S. customers. In a separate collaboration, NuScale and Ebara Elliott Energy are working on a commercial-scale high-temperature steam compressor project, integrating NuScale Power Modules with petrochemical plants. This initiative aims to produce high-temperature process steam for industrial applications.

On the analyst front, UBS has revised its price target for NuScale Power to $13 from $20, maintaining a Neutral rating. This adjustment is based on revised cash EBITDA estimates for the years 2026 through 2028. Craig-Hallum also adjusted its price target for NuScale Power, lowering it to $24 from $53, while maintaining a Buy rating. The firm highlighted NuScale’s strategic positioning as a potential leader in small modular reactor projects. Additionally, a report from Bernstein suggests that small modular reactors are emerging as a solution for powering artificial intelligence and hyperscaler growth, aligning with NuScale’s focus on SMR technology.

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