NuScale positioned for nuclear demand but faces long timelines

RBC Capital Markets initiated coverage on NuScale Power (SMR) with a Sector Perform rating and a $35 price target, acknowledging the company's first-mover advantage in the resurgent small modular reactor market. However, RBC highlighted significant execution risks and project delays, noting that securing a firm order by late 2025 appears unlikely, pushing back the 2030 delivery target and testing investor patience despite long-term upside potential.

Analysis

RBC Capital Markets has initiated coverage on NuScale Power (SMR) with a 'Sector Perform' rating and a $35 price target, reflecting a cautious but constructive long-term view. The analysis acknowledges NuScale's first-mover advantage, holding the first NRC-approved design for small modular reactors (SMRs) amidst what RBC terms a 'resurgence' in demand for nuclear energy, supported by over 50 gigawatts of tracked demand commitments and a U.S. goal to triple nuclear capacity. However, this potential is tempered by significant execution risks. RBC highlights delays in NuScale's initial projects with partners RoPower and ENTRA1/TVA, leading to the assessment that securing a firm order by the end of 2025 is 'unlikely.' This pushes back the company's target for its first reactor delivery in 2030 and is expected to test investor patience in the near term. While NuScale's partnership model shifts financial risk, RBC notes this only transfers uncertainty, as partners must still secure funding. The $35 price target, derived from a discounted cash flow analysis, signals that while long-term upside exists, the firm requires 'additional proof points' before turning more positive.

Key Decisions for Investors

• Given the 'Sector Perform' rating and the balance between long-term market potential and near-term execution uncertainty, investors may consider the current valuation to be fair, warranting a neutral or hold position until tangible progress is demonstrated.
• The primary catalysts to monitor are the securing of a firm commercial order and any concrete updates on project timelines with partners RoPower and ENTRA1/TVA, as these are the key 'proof points' required to de-risk the investment thesis.
• Investors should weigh NuScale's first-mover advantage against the significant risk of further delays and emerging competition, as a lack of tangible progress on orders and deployment could lead to near-term stock underperformance.