Key Takeaways
- UBS slashed NuScale Power (SMR) rating from Neutral to Sell, lowering the price target from $10 down to $6
- Shares plummeted approximately 9.4% following the downgrade, reversing earlier gains driven by AI-related power speculation
- Analyst Jon Windham at UBS highlighted prolonged construction schedules and absence of binding customer agreements as major red flags
- The firm anticipates approximately $700 million in combined cash outflows spanning 2026 to 2028, with profitability not expected until after 2030
- Additional worries include stalled developments with Tennessee Valley Authority and complications surrounding the RoPower initiative
NuScale Power (SMR) experienced a significant decline on Friday after UBS issued a Sell rating, downgrading from Neutral, while simultaneously reducing the price objective to $6 from a previous $10. Premarket activity showed shares declining 4.4% immediately after the announcement, with losses deepening to 9.4% during regular trading hours.
NuScale Power Corporation, SMR
This rating cut followed a brief upward momentum earlier in the week, fueled by investor enthusiasm surrounding artificial intelligence infrastructure and corresponding electricity requirements. As fundamental challenges reemerged, profit-taking accelerated.
According to UBS analyst Jon Windham, the company’s protracted development schedule of five years or longer represents a significant headwind. He emphasized that rival firms have already transitioned to active construction phases, whereas NuScale continues pursuing definitive customer agreements.
In Windham’s base case scenario, only a single NuScale facility would break ground by 2028. This represents a notably cautious projection relative to what appears embedded in the stock’s current trading multiples.
Financial Drain and Revenue Projections
According to UBS estimates, NuScale faces cumulative negative cash flow totaling roughly $700 million through the 2026-2028 period. Revenues are forecast to climb from $185 million in 2028 to $924 million by 2030, representing a 123% compound annual expansion rate.
Even with this substantial revenue trajectory, the analysis suggests positive net income won’t materialize before 2030. UBS calculates that current market pricing implies $124 million in 2028 EBITDA, sharply contrasting with their internal projection of merely $29 million.
This considerable disconnect between Wall Street expectations and UBS’s financial modeling forms the foundation of their bearish stance. The revised $6 price objective suggests potential downside of approximately 40% from recent trading levels.
Windham additionally cited minimal advancement in discussions with Tennessee Valley Authority alongside difficulties affecting the RoPower venture as factors that could further widen the discrepancy between investor assumptions and operational outcomes.
Market Pricing Outpacing Business Development
The selloff underscores growing investor anxiety that NuScale’s market valuation has significantly exceeded its commercial progress. The organization currently operates with minimal revenue generation and lacks any enforceable power purchase commitments.
NuScale maintains regulatory approvals and has completed substantial design engineering, potentially positioning the company favorably when electric utilities and hyperscale data center operators eventually choose small modular reactor vendors.
However, the investment thesis presently hinges on securing substantial contracts and arranging project financing. Any postponements in converting technological capabilities into revenue-generating projects may intensify downward pressure on shares.
Since the beginning of the year, SMR has declined 23.71%. Daily trading volume averages approximately 32 million shares, with technical indicators currently signaling Sell.
The company’s market capitalization currently hovers around $4.8 billion.
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