On Friday, CLSA initiated coverage on NuScale Power Corporation (NYSE:SMR) stock, a leading developer of advanced nuclear reactors, with an Outperform rating and a price target set at $11.00.
The firm highlighted that while NuScale is expected to operate at a loss for several years, the company's prospects are underpinned by various support mechanisms.
NuScale's return catalysts are anticipated to be sentiment-driven in the near term, hinging on regulatory approvals, successful demonstrations of their technology, and growing customer interest. Despite the forecast of operating losses in the immediate future, CLSA pointed to the backing from NuScale's parent company Fluor (NYSE:FLR), the availability of an 'ATM Programme', and Department of Energy (DOE) cost-share programs as key factors that can help mitigate financial pressures until the company is projected to become profitable in 2028.
The coverage by CLSA suggests that NuScale is positioned at the forefront of the advanced nuclear reactor space, with a positive outlook despite the expected initial years of operating without profit. The Outperform rating indicates the firm's belief in NuScale's potential to outpace the average market performance.
The $11.00 price target is based on the company's current development trajectory and the anticipated industry developments. NuScale's progress in the coming years, particularly in obtaining the necessary regulatory approvals and demonstrating the viability of its reactor designs, will be critical to achieving this target.
Investors and market watchers will likely keep a close eye on NuScale's advancements and the realization of the milestones laid out by CLSA. The company's journey towards profitability by 2028 will be a key narrative in the energy sector, especially in the context of the increasing global focus on clean and sustainable energy solutions.
InvestingPro Insights
As NuScale Power Corporation (NYSE:SMR) navigates through its development phase, real-time data from InvestingPro provides a snapshot of the company's financial health. With a market capitalization of $2.15 billion, the company's valuation reflects investor confidence despite its negative P/E ratio of -7.86, indicating that the market is pricing in future growth potential. The InvestingPro data shows a significant 23.64% return over the last week, which aligns with the positive sentiment highlighted by CLSA's coverage.
InvestingPro Tips suggest that NuScale holds more cash than debt on its balance sheet, which is a positive sign for its financial stability as it moves toward profitability. Additionally, the fact that liquid assets exceed short-term obligations provides further assurance of the company's ability to manage its finances in the near term. However, analysts anticipate a sales decline in the current year and do not expect the company to be profitable within this period. These insights can help investors weigh the risks and opportunities as they monitor NuScale's progress towards its 2028 profitability target.
For those seeking a deeper analysis, InvestingPro offers additional tips on NuScale Power Corporation's financial metrics and future prospects, which can be found at InvestingPro.
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