SMR Forensic Analysis

PART 1: TRADING EXECUTION

1. Trading Setup & Entry Strategy

THESIS: SMR is a classic "Techno-Fundamental" inflection play. The market is misinterpreting a massive $495M one-time accounting charge (tied to the TVA/ENTRA1 deal) as a structural failure. Technically, the stock has reclaimed the 50-Day SMA and is building a base for a run toward the 200-Day SMA. We are LONG on volatility.

• •Action: ACCUMULATE (Swing Long)
• •Entry Zone: $18.85 - $19.50 (Buying the retest of the 50-Day SMA breakout).
• •Stop Loss: $17.40 (Hard Stop). This is below the recent consolidation low and the 50-Day SMA. If it breaks this, the breakout was a fake-out.
• •Position Sizing: 3.5% of Portfolio (High Volatility Instrument).
• •Scaling:
  1. •Entry 40% at Market ($19.43).
  2. •Add 40% on pullback to $18.90 (50-day SMA).
  3. •Add final 20% on a daily close above $20.00 (Psychological resistance).
• •Take Profit:
  • •TP1: $22.45 (Upper Bollinger Band) - Trim 50%.
  • •TP2: $28.50 (Gap fill / Approach to 200-Day SMA) - Trim 30%.
  • •TP3: Runner for $30.00+ (Momentum squeeze).
• •Max Hold: 3-6 Weeks (Into Q4 Earnings).
• •Risk/Reward: 1 : 3.2

2. Executive Summary

SMR (NuScale Power) is trading at $19.43, recovering from a deep correction. The Q3 10-Q shows a staggering $532M Net Loss, but forensic analysis reveals $495M of this is a "success fee" (Milestone Contribution) triggered by the TVA/ENTRA1 deal. This is actually a bullish signal for commercial viability, masquerading as a financial disaster. Technicals confirm the turn: Price > SMA50, MACD Bullish Cross, and RSI at 53 (neutral) leaves room for upside. The $11 price target cut by analysts today is backward-looking noise; the market is looking forward to the 6GW TVA pipeline.

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PART 2: DETAILED RESEARCH

3. Recent Material Events (8-K Analysis)

• •Dec/Nov 2025 Filings: Routine governance and Exchange Agreement modifications with Fluor (reducing tax receivable payments).
• •Critical Insight: The lack of negative operational 8-Ks during the price drop suggests the sell-off was macro/sector driven rather than a fundamental broken thesis. The focus is on the TVA partnership execution.

4. Insider Trading Activity

• •Recent Activity: Multiple Form 4s filed in Jan 2026.
• •Context: Executives (CEO Hopkins, CFO Hamady) have 10b5-1 trading plans active. While selling into strength is expected, the absence of massive discretionary dumping at these lower levels ($19 vs previous $30 highs) signals management believes in the recovery.
• •Signal: NEUTRAL. Programmatic selling is noise; lack of panic selling is the signal.

5. Current News & Market Context

• •Jan 28, 2026: Analyst price target cut by $11. This is a lagging indicator reacting to the Q3 "paper loss." Market price is ignoring this ($19.43 is flat/green), which is a bullish divergence.
• •Jan 28, 2026: Confirmation of TVA/ENTRA1 deal tying to the largest SMR plan. This validates the Q3 expense.
• •Macro: Trump/Political environment is heavily favoring "Nuclear Renaissance." SMR is the high-beta proxy for this trade.

6. Business Model Analysis

• •Revenue Mix: Shifted from purely R&D cost-sharing to Engineering Services ($7.8M in Q3 from Fluor). This is higher quality revenue than grants.
• •Pricing Power: Limited currently. They are paying ENTRA1 (via the PMA) to secure customers. This reduces margins initially but secures the installed base.

7. Financial Health

8. Valuation Analysis

• •Current Market Cap: ~$3.2B.
• •Reverse DCF: At $19.43, the market implies ~25% annual growth for 10 years. This is aggressive but plausible if the 6GW TVA pipeline materializes.
• •Relative Value: Expensive on sales, but cheap on "Pipeline Value" compared to utility-scale nuclear projects.

9. Competitive Position

• •Moat: NRC Certification (Standard Design Approval). NuScale is years ahead of competitors in regulatory approval.
• •Risk: ENTRA1 holds the commercial keys. NuScale is the "intellectual property" and "manufacturer," but ENTRA1 is the sales channel.

10. Management Quality

• •Strategy: Management made a bold (risky) move paying ENTRA1 $495M (liability) to lock in TVA. It effectively "bought" the order book.
• •Execution: Improving. Revenue from Fluor services shows operational capability beyond R&D.

11. Risk Factors

• •Dilution Risk (High): 17.7M shares sold via ATM in 2025. They treat the stock as a currency. Expect more selling if price hits $25+.
• •Liability Overhang: They owe ENTRA1 cash (part of the $495M charge) over time.
• •Political Risk: Reliance on DOE/TVA support.

12. Forensic Accounting Flags

• •⚠️ The $495M "PMA" Charge: This is categorized as G&A expense but acts like a Customer Acquisition Cost. It distorts the P&L significantly. Traders reacting to the headline EPS miss are wrong; this expense confirms the sales pipeline.
• •⚠️ Related Party Revenue: 96% of Q3 revenue came from Fluor (a major shareholder). This is not yet organic third-party revenue.

13. Technical Analysis & Trade Timing

• •Trend: Bullish Transition. Stock rallied 34% in 20 days, breaking the 50-day SMA ($18.86).
• •Momentum: MACD is bullish (+0.22). RSI (53) is perfectly neutral—not overbought despite the 34% rally.
• •The "Widowmaker" Check: Fundamentals are ugly (huge loss), but price is reclaiming moving averages. DO NOT SHORT. The "Wait for Breakdown" rule applies for bears; for bulls, this is a breakout entry.
• •Key Levels:
  • •Resistance: $22.45 (Bands), $30.85 (200 SMA).
  • •Support: $18.86 (50 SMA), $15.31 (Lower Band).

14. Short-Term Trading Strategy (2-5 Days)

• •Timeframe: SWING_2_5_DAYS
• •Strategy: Buy the Dip. The stock is +1.20% today. Look for a red candle intraday to enter near $19.00.
• •Catalyst: Earnings anticipation and "digestions" of the TVA news.
• •Exit: If RSI hits 70 (currently 53), take profit immediately. Volatility is high.

15. Short Thesis (Why we are NOT shorting)

While the valuation is rich and dilution is rampant, shorting into a "Nuclear Renaissance" narrative with a recovering technical chart is suicide. The 200-day SMA ($30.85) is the magnet. We would only consider shorting at the 200-day SMA if momentum fails there.

16. Catalysts & Timeline

• •Jan/Feb 2026: Q4 Earnings Call (Watch for cash burn guidance and ATM usage).
• •Q1 2026: Further TVA project definitional phases.

17. Price Targets

18. Investment Recommendation

RATING: SPECULATIVE BUY Conviction: 7.5/10. The convergence of a "Golden Cross" attempt (eventually) and the validation of the order book via the TVA deal outweighs the ugly GAAP accounting losses. Risk is defined at the 50-day SMA.

One-Liner Thesis: NuScale's $495M "loss" is actually a bullish signal of a confirmed commercial pipeline with TVA, and the technical breakout above the 50-day SMA offers a distinct asymmetric entry before the market fully digests the pivot from R&D to Deployment.