NuScale’s (SMR) Growth Story Tempered by Valuation Concerns in BofA’s Neutral View

NuScale Power Corporation (NYSE:SMR) is one of the top performers on our list of most shorted stocks, with a year-to-date price return of nearly 94% and a 326% gain over the past year.

However, such a strong rally has made part of the market cautious about further upside, despite a robust growth opportunity lying ahead of the company. One such analyst is Dimple Gosai of Bank of America Securities. On August 21, Dimple initiated coverage on NuScale Power Corporation (NYSE:SMR) with a Neutral rating and a price target of $36.

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On the positive side, she believes that NuScale Power Corporation (NYSE:SMR) benefits from leveraging light-water reactor technology and Low-Enriched Uranium (LEU), which gives it a strategic advantage over competitors who use the less accessible High-Assay Low-Enriched Uranium (HALEU). HALEU refers to Uranium enriched to levels between 5% and 20%, compared to LEU, which is enriched up to 5%.

The company also appears to be in a sweet spot amid favorable policy changes and increasing demand for reliable power sources, which is primarily driven by data centers and artificial intelligence applications.

Despite this advantage, Gosai chose to start coverage with a cautious stance because she believes the company is still in its early commercialization phase and doesn’t yet have binding contracts to solidify its long-term case. Moreover, the growth prospects are largely reflected in the current valuation; thus, the upside potential appears limited for her.

NuScale Power Corporation (NYSE:SMR) is an energy technology company developing small modular nuclear reactors (SMRs) designed to provide safe, scalable, and carbon-free power.

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Disclosure: None. This article is originally published at Insider Monkey.