BofA cuts nuclear stocks on valuation concerns
https://finance.yahoo.com/news/bofa-cuts-nuclear-stocks-valuation-124526170.html
BofA cuts nuclear stocks on valuation concerns
1 min read
Investing.com -- Bank of America has downgraded Oklo and NuScale, warning that valuations for the two U.S. small modular reactor (SMR) developers have run “ahead of reality.”
In a research note, BofA cut Oklo to Neutral from Buy and lowered NuScale to Underperform from Neutral. “Valuations now embed deployment ramps and discount rates we view as unrealistic at this stage of SMR adoption,” the analysts wrote.
Their reverse discounted cash flow models, using a 14% discount rate, imply 15.5GW for Oklo and 34.7GW for NuScale by 2040, levels that are “44%/92% above each company’s base case forecast.”
BofA added that “on a combined basis, this totals ~50GW, or ~7% above the 47GW global unrisked SMR pipeline tracked by Wood Mackenzie.”
At current levels, Oklo trades at 16.9x/10.8x 2032/33E EV/EBITDA and NuScale at 11.9x/10.6x, with implied discount rates “well below our 14% sector assumption.”
Price objectives were revised to $117 for Oklo, up from $92, and to $34 for NuScale, down from $38.
“While we remain positive on the long-term nuclear theme, current valuations leave little room for error and the near-term risk/reward skews negative,” BofA said.
The bank also flagged execution and fuel risks. For Oklo, bulls point to “political backing and vertically integrated build-own-operate model,” but bears highlight capital intensity, fuel supply concerns, and questions over cost targets.
For NuScale, BofA cited concerns over supply chain costs, reliance on ENTRA1, and “credibility risk if no firm projects emerge.”
With short interest elevated in both stocks, BofA concluded that “cycle markers suggest the AI trade may be entering later stages.”
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