Nuclear power is all the rage right now. NuScale Power (SMR 9.45%) has a market cap of $11 billion, and its stock is up 360% in the last 12 months. Hype is growing for this resurgent energy solution to help match demand from data centers and artificial intelligence, which are growing like gangbusters.
However, risks abound for investors in this pre-revenue stock with a market cap above $10 billion. Here are two other industrial stocks I predict will be worth more than NuScale Power 10 years from now.
Rocket Lab’s strong growth
First up, we have Rocket Lab (RKLB 4.45%), which has around the same market cap as NuScale Power. The first advantage Rocket Lab has over NuScale Power is the fact that it actually generates revenue. That’s not a high bar, but a clear distinction that needs to be made. It is a disruptive rocket launch and space systems company nipping on the heels of SpaceX’s dominant market share in the industry.
With the Electron rocket, Rocket Lab regularly performs trips for commercial customers and the United States government, executing 59 successful launches and having 31 planned missions currently in its pipeline. It is the only company besides SpaceX to consistently launch payload rockets for customers, which they pay a pretty penny for.
Besides rocket launches, Rocket Lab is working to build the systems that companies actually launch into space. This includes communication systems, solar panels, and payload vehicles. Over the long term, it is aiming to build its own constellation of satellites, although what it aims to do with these satellites is unclear.
In the future, Rocket Lab will debut its Neutron rocket system, which is much larger than the Electron, translating into higher revenue per launch. Today, the company generates $466 million in revenue. Over the next few years, Rocket Lab has a chance to greatly grow its sales with the debut of the Neutron, expansion of its space systems, and working through its current product backlog of over $1 billion. This will get the company on a trajectory to be a much larger stock than NuScale Power in 10 years.
Rivian’s comeback potential?
A second stock that will be larger than NuScale Power in 10 years is Rivian Automotive (RIVN 2.46%). This is a fallen angel in the electric vehicle space aiming to get its mojo back with new product launches. The stock is down 92% from all-time highs after its much-hyped initial public offering (IPO).
Rivian debuted in the electric vehicle sector with premium trucks and SUVs. This limited its addressable market. Stagnating deliveries to customers have followed. Reviews say it has a great car, just not one for a wide audience that can afford a vehicle that costs upwards of $100,000.
Next year, it is aiming to launch the R2, a mid-size SUV with a much more affordable cost of $45,000. This should greatly increase Rivian’s annual deliveries to customers, which are currently hovering below 50,000. Without this scale, Rivian will struggle to generate positive cash flow. Free cash flow has improved in recent years but was negative $1.86 billion over the past 12 months.
A scaled-up Rivian Automotive can grow its annual revenue from $5 billion to between $15 billion and $20 billion, and eventually higher over the long term, with vehicles that appeal to mass audiences. Profit margins will be slim, as with all automotive businesses, but this should lead to at least $1 billion in annual earnings (an approximate 5% margin at $20 billion in revenue), which will easily help it obtain a larger market cap than NuScale Power in 10 years.
RKLB Revenue (TTM) data by YCharts
Why most stocks will be worth more than NuScale Power in 10 years
Being larger than NuScale Power in 10 years will be simple. It may look like a large company today with a market cap of over $11 billion, but this is a pre-revenue company. All of its revenue today is from contracts to plan on building its products; they come with no positive unit economics and can be considered a wash from costs.
It generates zero dollars in revenue today. If its plans for nuclear energy development and its small modular reactors come along on schedule, it will not generate any revenue until 2030. Even so, it will probably be negligible revenue, given how its projects are essentially tests for the modular technology. It has not been proven yet that this technology can work economically or much better than large reactors. A previously committed project in Utah was canceled because of delays and cost overruns.
NuScale Power talks a big game, but it keeps kicking the can down the road when it comes to actually building and deploying a product. I don’t expect this to change over the next 10 years this is a dangerous stock to buy and one headed much lower in the years to come. For this reason, stocks such as Rivian and Rocket Lab are better bets and should be larger than NuScale Power in market capitalization 10 years from now.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
