NuScale Power Just Reported Earnings. Here's Why I'd Buy After the Numbers Dropped.
Key Points
NuScale Power just reported earnings.
Shares have fallen 10% since earnings, despite positive updates.
NuScale Power (NYSE: SMR) has huge growth potential. The nuclear company is chasing a multi-trillion-dollar opportunity that should persist for decades to come.
That opportunity is made possible through the rapid adoption of artificial intelligence technologies, which in turn is fueling a global buildout of data center infrastructure. All that infrastructure will need massive amounts of new energy generation capacity to function properly. NuScale's small modular reactor (SMR) technology could be a perfect antidote to these scaling challenges.
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Despite this rosy growth potential, NuScale stock is down 79% versus its former highs set last summer. That includes a 10% drop since the company reported earnings on May 7, even though there was some positive news on several major projects in the pipeline. Here's why I would consider buying shares following the post-earnings slide.
Here's why NuScale Power is a buy after earnings
NuScale is a nuclear power stock with a very specific approach. The company doesn't build conventional nuclear power plants, or NPPs. Instead, it specializes in small modular reactors, or SMRs. According to Bank of America analysts, SMRs have five advantages versus NPPs: better affordability, enhanced safety, modularization potential, smaller footprints, and reduced CO2 emissions.
All these advantages make SMRs a perfect fit for addressing the rapidly rising energy needs of the AI and data center industries. In total, research from Bank of America believes the SMR opportunity could total several trillion dollars -- a stark contrast to NuScale's $4.1 billion market cap.
Image source: Getty Images.
We received several positive updates during NuScale's latest earnings call. Shareholders of SN Nuclearelectrica SA approved the next phase of NuScale's RoPower SMR project in Romania. Plus, progress planning for the largest nuclear power deployment in U.S. history -- a collaboration between NuScale, ENTRA1, and the Tennessee Valley Authority -- continued with no major hurdles disclosed.
Why, then, have shares lost an additional 10% since this update? While these updates were mildly positive, it will still be many years before either the Romanian or American SMR projects come online. This is the major challenge with NuScale stock today: The upside potential is massive, but the road to realizing that growth potential is long.
I'd buy NuScale Power stock today for one reason: The upside potential is lucrative, and the upfront price tag is small. Just understand that this story will take years, if not decades, to fully play out. And risks abound -- everything from execution challenges to ongoing shareholder dilution. But if you're looking for stocks with maximum upside potential and are willing to accept a higher risk profile, NuScale shares should top your watchlist.
Bank of America is an advertising partner of Motley Fool Money. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.