Target price slashed to $18.50! Citigroup sings short on NuScale Power (SMR.US): Short-term benefits are hard to hide contract and revenue risks.

Citigroup reiterated its "sell/high risk" rating on NuScale Power (SMR.US), a small modular reactor company, and significantly lowered its target price from $37.50 to $18.50, citing contract uncertainty and revenue pressure faced by the company. Citigroup analyst Vikram Bagri pointed out that as the only nuclear company with an approved small modular reactor design by the U.S. Nuclear Regulatory Commission, NuScale has a significant regulatory approval and timing advantage, as well as a first-mover advantage in the industry in the backdrop of data center and artificial intelligence (AI)-driven power demand growth. However, the company still faces significant project execution risks, and its stock price seems to have already priced in high installation expectations by 2040, which is not proportional to the expected increase in global nuclear capacity. The analyst stated that there may be short-term factors driving the company's stock price higher, but in the long term, revenue pressure will continue to be evident. On one hand, existing contract-related revenue is declining, and on the other hand, partner Fluor Corporation (FLR.US) is continuing to divest and NuScale needs to issue more stock to fulfill payment obligations. Additionally, Bagri expects the first nuclear power module sales for the company to be delayed by two years and believes there is a low likelihood of NuScale signing definitive contracts in the medium term with the U.S. Tennessee Valley Authority 6 1/2% Putable Automatic Rate Reset Secs 1999-1.5.29 Series A. As of Wednesday's close, NuScale's stock price fell by 4.69%.