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Unusual Options Volume for NuScale Power (SMR) Offers a Compelling High-Risk Wager

Barchart - Tue Mar 21, 2023

Although discussions about the next generation of power-related infrastructures tend to focus on renewable energy sources, the reality is that they’re not holistically practical. On the other hand, the nuclear power industry, though scientifically robust, runs into understandable controversies. However, NuScale Power (SMR) provides a compelling middle ground, making SMR stock worthy of investigation.

Unlike traditional nuclear facilities, NuScale focuses on advanced small modular reactors or SMRs. Featuring a safe, scalable and reliable carbon-free energy source, SMRs primarily benefit from their smaller physical footprint. Therefore, they can be integrated in areas inaccessible to typical large-scale powerplants.

Beyond that, NuScale represents the first and so far only SMR to have its design certified by the U.S. Nuclear Regulatory Commission. Fundamentally, then, NuScale is well positioned to deliver on the myriad applications associated with nuclear facilities, such as electrical generation, district heating and commercial-scale hydrogen production.

Unfortunately, circumstances in the market have not been particularly auspicious for SMR stock. Since the January opener, shares plunged 16%. In the trailing year, they’re down 15.6% (as of the Monday close). And since NuScale made its public market debut, SMR slipped a hair over 15%.

To be fair, NuScale needs to step up its financial performances. In the fourth quarter of 2022, the company reported an earnings loss of 18 cents per share. However, covering analysts anticipated that NuScale would post an earnings loss of only 2 cents. Also, the enterprise posted revenue of $3.44 million, missing the consensus target of $5 million.

Still, SMR stock represented one of the highlights for’s screener for unusual stock options volume. Specifically, total volume reached 5,269 contracts against an open interest reading of 30,843. The delta between the Monday session volume and the trailing one-month average volume came out to 509.13%.

Moreover, call volume came out to 5,223 contracts against put volume of only 46. Therefore, the put/call volume ratio pinged at 0.01, on paper favoring the bulls. Moving forward, prospective speculators should consider these three factors bolstering NuScale Power.

Energy Infrastructure Development Can’t Ignore the ‘Nuclear Option’

Although the political and ideological winds favor the mass development of renewable energy infrastructures, in reality, the nuclear option cannot be ignored. No other power source features the incredible density that nuclear fuel provides.

According to the Nuclear Energy Institute, one uranium fuel pellet “creates as much energy as one ton of coal, 149 gallons of oil or 17,000 cubic feet of natural gas.” Further, the institute points out that nuclear facilities generate more than half of the country’s clean energy by using uranium as opposed to burning fossil fuels.

Additionally, the capacity factor or measurement of reliability of nuclear energy is unrivaled. According to the Office of Nuclear Energy, the namesake power source features a capacity factor of 92.5%. The next closest source is geothermal at 74.3% and it declines considerably from there. In contrast, wind and solar post a capacity factor of 35.4% and 24.9%, respectively.

As modernity increases demand for reliable power, nuclear facilities will look much more attractive. That points to a significant opportunity for NuScale, thus bolstering SMR stock.

Scalability and Decentralization Undergird SMR Stock

One of NuScale’s biggest advantages is the ability to scale power for its customers’ needs. At the baseline, the company’s Power Module – a small, safe and pressurized water reactor – can generate 77 megawatts of electricity (MWe) or 250 megawatts thermal (gross). However, this can be scaled upward to a maximum capacity of 924 MWe.

In addition, the modularity undergirding SMRs enable “decentralized” power facilitation, essentially bringing energy sources closer to the source of demand. While NuScale will likely have to undergo product evangelism to highlight its facilities’ advanced safety protocols, once public hesitations are overcome, the company could generate significant revenue.

Additionally, the combination of scalability and decentralization empower downwind benefits. In particular, SMRs may make desalination – or the conversion of ocean water into potable (drinking) water – an economically viable solution to the water shortage crisis.

NuScale May Help the EV Rollout

Obviously, one of the hot topics of the moment is the burgeoning electric vehicle industry. Though companies like Tesla (TSLA) suffered sharp losses on a trailing-year basis, the sector itself sparks considerable attention. After all, analysts seemingly love nothing more than reminding their audiences that EVs are the future.

If so, both government agencies and private enterprises must find ways to deliver unprecedented energy volumes to electricity-consuming EVs. While it’s a nice idea that solar panels and wind turbines can power the transportation and mobility needs of the U.S. (and the rest of the world), it’s just not a realistic proposition. Frankly, these popular energy sources take up too much real estate and offer relatively little energy for the space consumed.

Here, SMRs can be a gamechanger. By manufacturing facilities dedicated to EV infrastructure, NuScale can potentially pick up the slack from an aging national grid that has difficulty accommodating air conditioners in a heat wave, let alone full-sized vehicles.

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On the date of publication, Josh Enomoto did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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