Tuesday, Wells Fargo downgraded Nuscale Power stock (NYSE: SMR) from Equal Weight to Underweight, setting a new price target of $4.50, a significant decrease from the previous $7.50 target. The downgrade reflects concerns over the company's financial position and market competitiveness.
The analyst from Wells Fargo expressed skepticism regarding the recent surge in Nuscale Power's stock, which saw a year-to-date increase of 207% compared to the S&P 500's 8% rise. The positive momentum in the stock was attributed to advancements in the nuclear sector, particularly benefiting nuclear owners CEG & TLNE. However, the analyst believes that the investor enthusiasm for Nuscale Power is unwarranted.
The rationale behind the downgrade and new price target includes several key concerns. Firstly, Nuscale Power has not secured any customers for its VOYGR product. Additionally, the company's financial condition is precarious, with available cash providing approximately one year of operational runway. This financial situation could pose significant challenges in securing new customers.
Furthermore, the VOYGR technology's cost competitiveness is in question when compared to other sources of power generation. The company's flagship project, the Carbon Free Power Project (CFPP), was also terminated after more than a decade in development, further casting doubt on the company's future prospects.
The revised price target of $4.50 per share is based on the assumption that Nuscale will manage to increase its annual Nuclear Power Module unit sales to around 30, or 2,300 MW, by the mid-2030s. This is despite the fact that the company has not achieved any unit sales to date.
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