Last Update21 Oct 25Fair value Decreased 2.04%
NuScale Power's analyst price target has decreased from approximately $41.69 to $40.84, as analysts cite ongoing valuation concerns and increased uncertainty around key contract milestones. This comes despite positive developments in the company's pipeline.
Analyst Commentary
Recent commentary on NuScale Power reflects a balance of optimism about the company’s position in the emerging small modular reactor (SMR) market and ongoing caution regarding near-term execution and financial risks. Analysts are updating their perspectives as NuScale secures significant partnerships but still faces notable challenges that impact their outlook on valuation and growth.
Bullish Takeaways
- New collaborations with major utilities and energy firms have resulted in the largest SMR power commitment in U.S. history. This has the potential to supply power to millions of homes, highlighting NuScale's technology validation and commercial potential.
- Bullish analysts view the growing demand for always-on clean power as an important long-term growth driver and consider NuScale well positioned to capitalize on the resurgence in nuclear energy.
- Recent upgrades to price targets reflect increased confidence in the company's pipeline and improved prospects for advanced nuclear technology deployment. This is being driven by active partnerships and supportive policy environments.
- Estimates are being raised based on expectations that binding agreements and scalability could further accelerate growth and allow NuScale to capture a meaningful share of the U.S. SMR opportunity, which is sized at hundreds of gigawatts by 2050.
Bearish Takeaways
- Bearish analysts remain wary of the company's valuation, noting it already prices in significant future success despite the early stage of commercialization and limited binding contracts.
- Key project milestones and the likelihood of near-term agreements, including with certain utilities, are seen as uncertain. This has led to cautious and in some cases downgraded ratings.
- There are concerns over the need for substantial additional capital, including potential sizable payments to partners, which could result in further dilution or financial risk if outside funding is required.
- Skepticism persists regarding scalability and execution of the partnership model. There is a desire for further proof that commercial deployment can move from design approval to sustained customer adoption.
What's in the News
- NuScale Power is supporting ENTRA1 Energy’s agreement with the Tennessee Valley Authority to deploy up to 6 gigawatts of SMR capacity across seven states. This represents the largest SMR deployment program in U.S. history (Key Developments).
- This SMR deployment is expected to power the equivalent of the entire Dallas-Fort Worth area, targeting growing demand from datacenters, artificial intelligence, semiconductor manufacturing, and other critical infrastructure sectors (Key Developments).
- NuScale remains the first and only U.S. NRC-approved SMR technology ready for commercial deployment, further validated by its role in the ENTRA1-TVA partnership (Key Developments).
- The company and ENTRA1 have entered into a Partnership Milestones Agreement, facilitating up to $55 million in NuScale technology contributions for future projects. These contributions will be distributed as project milestones are met (Key Developments).
- NuScale Power has filed a $500 million follow-on equity offering, issuing Class A Common Stock through an at-the-market transaction (Key Developments).
Valuation Changes
- Consensus Analyst Price Target has decreased slightly from $41.69 to $40.84, reflecting updated market perspectives.
- Discount Rate has risen modestly from 8.67% to 8.90%, indicating analysts are accounting for slightly higher perceived risk.
- Revenue Growth projections have edged up from 105.40% to 107.59%, which suggests expectations for stronger top-line expansion.
- Net Profit Margin estimates have improved from 10.25% to 10.56%, which hints at anticipated operational efficiencies or profitability gains.
- Future P/E ratio has declined from 176.09x to 163.14x, which signals increased earnings expectations relative to share price.
Key Takeaways
- NuScale's advanced SMR commercialization and partnerships position it well for accelerated revenue growth and immediate deployment in competitive energy markets.
- Efficiency improvements and strategic focus on reducing expenses are expected to enhance profitability and support margin expansion.
- Challenges in securing agreements, funding uncertainties, and potential supply chain issues threaten cash flow, earnings, and profitability, despite project advancements.
Catalysts
About NuScale Power- Provides small modular reactor technology solutions.
- NuScale's involvement in the RoPower 6-module small modular reactor (SMR) power plant in Romania indicates future meaningful revenue and cash flow through its partnership in the Fluor-led Front-End Engineering and Design (FEED) Phase 2. This project enhances NuScale's revenue prospects.
- With an NRC-approved SMR technology and the commitment of over $2 billion towards its development and licensing, NuScale is uniquely positioned for immediate commercial deployment compared to competitors focused solely on demonstration plans. This potentially accelerates revenue growth once commercial operations commence.
- NuScale is advancing the manufacturing of long-lead materials for 12 modules, anticipating customer demand, which supports a smooth production ramp-up, reducing delivery times significantly, and potentially boosting future revenue and earnings.
- Significant demand for nuclear energy, especially from AI-driven data centers like Microsoft and Meta, could lead to increased interest and order placements for NuScale’s SMR technology. This could materially increase future revenues as data centers triple their energy use by 2028.
- NuScale's focus on reducing operating expenses, as noted by the substantial year-over-year decrease, could lead to improved net margins. Efficiency improvements transitioning from R&D to commercialization are likely to enhance profitability and support margin expansion.
NuScale Power Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming NuScale Power's revenue will grow by 121.5% annually over the next 3 years.
- Analysts are not forecasting that NuScale Power will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate NuScale Power's profit margin will increase from -368.8% to the average US Electrical industry of 10.5% in 3 years.
- If NuScale Power's profit margin were to converge on the industry average, you could expect earnings to reach $42.2 million (and earnings per share of $0.12) by about April 2028, up from $-136.6 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 248.0x on those 2028 earnings, up from -13.0x today. This future PE is greater than the current PE for the US Electrical industry at 19.7x.
- Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.48%, as per the Simply Wall St company report.
NuScale Power Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The complexity and negotiation challenges of securing long-term power purchase agreements with prospective customers could delay revenue generation and impact cash flow projections.
- The U.S. government grant-related uncertainties and the administrative process of securing additional funding highlight a possible risk to future liquidity and investment inflow, potentially affecting financial stability and development timelines.
- Potential bottlenecks in the supply chain or manufacturing process for the small modular reactors, despite current advancements, could lead to increased operational costs and affect net margins.
- The dependence on the successful commercialization of ENTRA1 Energy projects and the potential delays in customer acquisition for NuScale's long-lead modules pose a risk to revenue forecasts and earnings projections.
- The ongoing regulatory approval process with the NRC for the power upgrade and overall project complexity may result in unanticipated expenses or timeline shifts, impacting future earnings and profitability.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $24.46 for NuScale Power based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $29.0, and the most bearish reporting a price target of just $17.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $402.3 million, earnings will come to $42.2 million, and it would be trading on a PE ratio of 248.0x, assuming you use a discount rate of 7.5%.
- Given the current share price of $13.91, the analyst price target of $24.46 is 43.1% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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