NuScale Power (SMR) shares plummet, UBS downgraded to "sell" rating, warning of possible 40% decli

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Core Points

Credit Suisse downgraded NuScale Power (SMR) to "sell" from "neutral" and lowered its target price from $10 to $6.
shares fell about 9.4% after the downgrade, reversing previous gains driven by AI-related power speculation.
Credit Suisse analyst Jon Windham pointed to the long construction timetable and lack of binding customer agreements as major risk signals.
The company expects a total net cash outflow of approximately US$700 million between 2026 and 2028, and it is expected that profits will not be realized until after 2030.
Other concerns include development stagnation with the Tennessee Valley Authority (TVA) and the complexities facing the RoPower plan.

Market pricing outpaces business development

NuScale Power (SMR) fell significantly on Friday as Credit Suisse downgraded its rating to "sell" from "neutral" and lowered its target price to $6 from the previous $10. Pre-market trading showed that the stock price fell 4.4% immediately after the announcement, and the loss during the regular trading session widened to 9.4%.

The downgrade follows a brief upward trend earlier this week, fueled by investors 'enthusiasm for artificial intelligence infrastructure and its corresponding power demand. As fundamental challenges resurface, profit-taking accelerates.

According to Credit Suisse analyst Jon Windham, the company's long development timetable of five years or more poses a significant headwind. He emphasized that competitors have moved into an active construction phase, while NuScale is still seeking firm customer agreements.

In Windham's basic scenario, only one NuScale facility will break ground by 2028. This is a fairly cautious forecast relative to the expectations implicit in current stock trading multiples.

Financial Consumption and Revenue Projections

According to Credit Suisse estimates, NuScale faces cumulative negative cash flow over the period 2026-2028, totaling approximately US$700 million. Revenue is expected to grow from US$185 million in 2028 to US$924 million in 2030, with a compound annual growth rate of 123%.

Even with such a huge revenue trajectory, analysis suggests that net positive returns will not occur until 2030. Credit Suisse calculates that current market pricing means EBITDA in 2028 of $124 million, in sharp contrast to its internal forecast of only $29 million.

This huge disconnect between Wall Street expectations and Credit Suisse's financial model forms the basis for its bearish stance. The revised US$6 price target indicates that based on recent trading levels, the potential downside is approximately 40%.

Windham also cited the lack of progress in discussions with the Tennessee Valley Authority and difficulties affecting the RoPower project, factors that could further widen the gap between investor assumptions and operating results.

Market pricing outweighs business development

The sell-off highlights growing anxiety among investors that NuScale's market valuation has far exceeded its business progress. The organization currently has a meager income and does not have any binding commitments to purchase electricity.

NuScale has received regulatory approval and completed extensive design engineering, which could put the company in a strong position when power utilities and ultra-large data center operators ultimately choose small modular reactor suppliers.

However, the current investment argument depends on obtaining a large number of contracts and arranging project financing. Any delay in turning technical capabilities into revenue-generating projects could add to downward pressure on stock prices.

SMR has fallen 23.71% since the beginning of the year. Average daily trading volume is approximately 32 million shares, and technical indicators are currently sending sell signals.

The company's market value currently hovers around US$4.8 billion.