A second Wall Street firm is covering NuScale Power (NYSE: SMR), giving the nuclear company a ‘buy’ rating and setting a target of $18 for its stock from the $13 price at initiation on Thursday.
Guggenheim Securities joins Cowen in tracking the small modular reactor designer, which has its headquarters in Portland and much of its engineering staff in Corvallis.
NuScale and Guggenheim have some history together: NuScale retained the firm last year to help it find new investors. That led to a blank-check merger deal with Spring Valley Acquisition Corp. that defied market SPAC sentiment and launched NuScale onto the New York Stock Exchange with net proceeds of $341 million.
Cowen also worked on the SPAC deal.
In kicking off its coverage, Guggenheim made a case for nuclear power as a climate and energy security solution and said NuScale offers a pure-play opportunity with several advantages. Chief among them: a strategy that is not capital intensive.
“NuScale is providing the (intellectual property) and engineering expertise, not warehousing inventory and (engineering, procurement and construction) risk,” the firm wrote. NuScale has plenty of runway, as well, thanks to its IPO proceeds and cost-share backing from the federal government.
A simple design and headway in regulatory certification compared to competitors give NuScale “first-mover advantage (that) should allow it to capitalize on (a) backlog of promising leads,” Guggenheim analysts wrote.
The main risk Guggenheim sees for NuScale is a familiar one for early-stage companies — “converting its pipeline into contracted projects to build and backlog.” That puts a spotlight on its firmest and first project, in Idaho with Utah Associated Municipal Power Systems.
“In between now and the first fuel load in Idaho (~2029), the company will have to regularly communicate on its work to convert the different pipeline classes and MOUs into contracts, which we expect could move in fits and starts,” Guggenheim wrote.
NuScale was trading at $14.08 in late trading Friday, up about 8% since the Guggenheim note came out.
