NuScale Power: Hyped But Lacking Substance

seekingalpha11-20 17:36

NuScale Power shares have surged nearly tenfold in the past 12 months, but high short interest at 23% raises concerns.Nothing is stated in the investor presentation about possible economic ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2484160610?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2149037448/image_2149037448.jpg","is_english":true,"pubTime":"2024-11-20 17:36","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2484160610","market":"us","top_or_hot":-1,"title":"NuScale Power: Hyped But Lacking Substance","media":"seekingalpha","content":"<div>\n<p>NuScale Power shares have surged nearly tenfold in the past 12 months, but high short interest at 23% raises concerns.Nothing is stated in the investor presentation about possible economic ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738907-nuscale-power-hyped-but-lacking-substance\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>NuScale Power: Hyped But Lacking Substance</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nNuScale Power: Hyped But Lacking Substance\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-20 17:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738907-nuscale-power-hyped-but-lacking-substance><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>NuScale Power shares have surged nearly tenfold in the past 12 months, but high short interest at 23% raises concerns.Nothing is stated in the investor presentation about possible economic ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738907-nuscale-power-hyped-but-lacking-substance\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SMR.WS","symbol_name":"NuScale Power Warrant","start_time":0,"source_url":"https://seekingalpha.com/article/4738907-nuscale-power-hyped-but-lacking-substance","article_id":"2484160610","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2149037448/image_2149037448.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484160610","pubTimestamp":1732095384,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"NuScale Power shares have surged nearly tenfold in the past 12 months, but high short interest at 23% raises concerns.Nothing is stated in the investor presentation about possible economic opportuniti","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SMR.WS":"NuScale Power Warrant","SMR":"NuScale Power","BK4182":"重型电气设备"},"translate_title":"NuScale Power：大肆宣传但缺乏实质内容","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SMR":0.9,"SMR.WS":0.9},"content_text":"NuScale Power shares have surged nearly tenfold in the past 12 months, but high short interest at 23% raises concerns.Nothing is stated in the investor presentation about possible economic opportunities. In other words, there are no concrete calculations.There is also significant share dilution (30% increase in 12 months) and moderate stock-based compensation.koto_feja  Investment Thesis Over the past 12 months, NuScale Power (NYSE:SMR) shares have been an excellent trade with an almost 10x increase. The stock is currently trading at the absolute top of its 52-week range. On 18.11.24 alone, there was an 18% increase. And yet, as you can see below, the short interest is at a very high 23%. In this article, I will try to clarify and explain why this is not an investment for me and why I consider the stock very speculative. Seeking Alpha Company Overview In my last article from April 2024, I already wrote an introduction to the company.  NuScale's IPO was in May 2022 and is headquartered in Portland, Oregon. The company researches a new kind of nuclear power: small and modular. The company describes its \"VOYGR\" light-water reactors as \"the future of nuclear\" and says they are suitable for power generation, hydrogen production, or water desalination. According to the company, the system is designed to be modularly expandable and only needs to be refueled with new uranium every 24 months. The modular design offers many advantages: Locally flexible, easily transported by ship, train, or truck, and very safe (according to the company). Article: NuScale Power Shows Too Many Red Flags  In addition, the company mentions that it has the only small-scale reactor certified by the U.S. Nuclear Regulatory Commission (NRC) (Investor presentation, page 3). They currently have six reactors in production, which will be able to generate \"24/7, baseload power supporting the growing needs of data centers and artificial intelligence\". A strong argument for these reactors is their ability to supply energy without an external grid connection to critical infrastructures (e.g., hospitals, data centers, or military facilities). Furthermore, the company repeatedly mentions the opportunities arising from the energy transition and the need to complement wind and solar power deployment and also claims to be in a great position to benefit from government support and Investor presentation \"Advances in SMR Developments 2024\" Although SMR is NuScale's ticker symbol, it is generally the abbreviation for Small Modular Reactor. \"Advances in SMR Developments 2024\" is a free publication by the International Atomic Energy Agency (IAEA). In this context, SMR refers to the reactors, not the company. It contains interesting information about the general state of nuclear energy and small-scale reactors.  Advanced nuclear power technologies such as small modular reactors (SMRs) and microreactors, a subset of SMRs, have the potential to play a key role in the coming nuclear power expansion. The high case scenario of the IAEA's latest projections sees nuclear electrical generating capacity in 2050 being two and a half times greater than today. A quarter of that new capacity is projected to come from SMRs. IAEA  The report presents a bullish outlook for small modular reactors; some of the positive aspects are:  flexibility and versatility lower upfront costs safety features comparable to or even above current reactors possible savings because of serial production other use cases like seawater desalination \"some SMRs are also designed for flexible operation with variable renewable energy\" (page 8). the report mentions a growing acceptance of nuclear energy following the recent COP28 conference    The 28th United Nations Climate Change Conference (COP28) was a historic event for nuclear energy when it was formally specified as one of the solutions to climate change in the First Global Stocktake of progress toward meeting the goals of the Paris Agreement. oecd-nea.org  The negative aspects are (page 8):  \"Although SMRs promise lower upfront capital costs per unit, their overall economic competitiveness is yet to be proven.\" \"manufacturing approaches for novel components\" \"fuel supply and fuel cycle back-end solutions still need attention\"  The Aris database and what it means for NuScale The IAEA maintains a database called the Advanced Reactor Information System (ARIS), in which various SMR concepts and their development and deployment stages are recorded. According to this, more than 80 different SMR designs and concepts exist worldwide. A few are already in operation in China and Russia, and about four more will follow in four different countries by 2026. www-pub.iaea.org The NuScale's reactor is a water-cooled land reactor. I apologize for the many abbreviations, but the following section contains a lot of information about possible competitors, and NuScale is explicitly mentioned :  There are currently some 14 land-based, water-cooled SMR designs from nine Member States, including integral pressurized water reactors (PWRs), compact PWRs, loop-type PWRs, boiling water reactors (BWRs) and pool-type PWRs for district heating-all parts of the water cooled reactor (WCR) family. The integral PWR CAREM is under construction in Argentina, and first criticality is targeted for 2028. Construction began on another SMR, the ACP100 in China, in 2021; this reactor should start commercial operation by 2026. Additional designs for near-term deployment include the RITM-200N (the Russian Federation); the NuScale VOYGR, the Westinghouse AP300 and the GEHitachi BWRX-300 (the United States of America); the Rolls-Royce SMR (the United Kingdom) IAEA (page 10)  Is NuScale ahead of the competition? In its documents, NuScale repeatedly describes its significant lead over the competition and claims that the competition has not even submitted its documents for NRC licensing. That seems true because only NuScale is listed under \"current licensing reviews\" on the NRC website. There are many \"pre-application activities,\" but that sounds like years will pass until approval. Investor presentation The company appears to be ahead of the competition in terms of certification. However, I can't say anything about the technological lead, and you'd probably have to be an absolute insider expert to make a serious assessment. Since systems are already running in Russia and China and under construction in other countries, I think it's safe to say that NuScale is ahead of the American competition but not the international. Interestingly, the text below also mentions an SMR under construction in the USA, but this is only for heat production. So, it has also received a license to build from the NRC. www-pub.iaea.org Valuation & cash burn The company is currently valued at an enterprise value of $2.64B, its market cap is $2.76B (figures from Yahoo Finance), and its remaining net cash is about $154M. However, something seems wrong with the Seeking Alpha main page because the market cap does not match the enterprise value. Judging by the number of outstanding shares (about 101M) multiplied by the share price, the enterprise value seems correct, and the market cap incorrect. Seeking Alpha The valuation is difficult to assess, if not impossible. The company has virtually no sales, and in view of the current losses, the cash reserves will only last for another 3 to 4 quarters. Investor presentation So, in this case, there is no P/E ratio and not even a P/S ratio. If there were a reasonably foreseeable outlook, it wouldn't even be a disaster that there are no revenues yet. However, nothing is stated in the investor presentation about possible economic opportunities. In other words, there are no concrete calculations on how much money the company will earn and with what margin (more on this in the Risks section). So, I don't know what else I can write about valuation. I think the current valuation is primarily based on hope and hype and not on any numbers because there simply are none. Risks The risk section is rather long and contains some critical points. This is the explanation why I won't invest here. The IAEA report above shows how many different small modular technologies there are: land-based, gas-cooled, molten salt reactors, and so on. Within these families, there are various designs from various countries and companies. In my opinion, it is almost impossible for private investors to keep an overview and assess what's the best technology. The best technology will probably prevail in the long term based on criteria such as cost, safety, and scalability. At least that's always the case in all areas: why should humanity use dozens of different SMR technologies if one or two of them are clearly the best? For example, the one in China is a molten salt reactor. My point is that it is not yet clear which technology will outperform the others, which is why this aspect represents a risk for the company. Approved or not? Right at the beginning of the Investor presentation, the company mentions that:  \"NuScale is the sole small modular reactor (\"SMR\") technology certified by the U.S. Nuclear Regulatory Commission (\"NRC\") Investor presentation  While this statement is true, it turns out that the NRC has approved the original design, which was certified for 50 MW. However, the newer 77 MW version has not yet been approved. The application was submitted in 2023, and processing will likely take at least two years. Also approved is the emergency planning zone design, which took seven years to obtain, according to the company. NuScale The above were my words, but the research (and short seller) company Iceberg Research formulates the same issue from a much stricter point of view. They argue that NuScale's requested Standard Design Approval is not the correct application and could require a new full certification. They argue that NuScale uses the \"approved by NRC\" statement as a \"marketing trick\".  NuScale's marketing now leans heavily on one claim: having the first and only SMR design certified by the US Nuclear Regulatory Commission (\"NRC\"). This statement is everywhere. It features on NuScale's website, investor presentations, and on earnings calls. Unfortunately, journalists have also echoed this story, without questioning its meaning. The 77-MWe reactor is not a simple update of the previous design, as increasing the power output by ~50% will cause more stress to critical components of the reactor. The company requested for a Standard Design Approval (\"SDA\") and not full certification. SDA is a less rigorous step in the approval process. It does not prevent issues resolved by the design review process from being reconsidered during a rulemaking for a design certification, or during hearings associated with a construction permit, or combined license application (Source). iceberg-research.com  Not much concrete If you read the investor presentation carefully, you realize it lacks concrete information. On the other hand, it talks a lot about the opportunities that arise from data centers, the energy transition, and the head start in the approval process compared to the competition. So what is missing? Information or estimates, at least, on the approximate economic conditions that the company expects. How are we supposed to assess the company's potential economic viability? From the available information, I cannot estimate when the company will earn money and how much, whether it will be profitable, or what margin it will have. In addition, the investor presentation is only 21 pages long, and several pages are just very general statements. Share dilution, insider trades & SBCs I check these aspects in each article: Excessive share dilution and stock-based compensation ('SBC') can be detrimental to shareholders, and insider trading sometimes contains valuable information about management confidence. nasdaq.com The outstanding shares have increased by almost 30% in the last 12 months alone. However, the SBCs are relatively moderate, but keep in mind the company only has around 400 employees. Data by YCharts Conclusion Nuclear energy and probably also small-scale reactors will play essential roles in the future. But with so little concrete information, an investment is simply too risky, in my opinion. The new version of their system is not certified yet. Even if that happens, it is unclear whether there will be demand. Will the actual delivery in 2030 be adhered to as a time frame? Perhaps a competitor system will already be certified by then. And even if all that happens, will the company be profitable? My problem is that there are many unanswered questions; some are almost impossible for non-expert private investors to assess. However, based on the development of the outstanding shares, it appears likely that investors will continue to get diluted.  The share has certainly been hyped in the last few months. Congratulations to all who invested, and the stock is still showing an upward trend. It seems possible that a short squeeze could cause the share price to rise even further in the short term. However, I don't see the substance in this rally. If the share starts to go into a downward trend, I think there could be a short-selling opportunity waiting. But for now, I'll just wait and get back to you when I think the time is right for a short (or one day for a long-term investment, who knows). I'll rate it as a hold because if I owned the stock, I would not sell it at the moment, but only when there is a trend reversal.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484160610"}