Goldman Sachs initiates coverage on Oklo: SMR nuclear leader, many positives but still pending implementation, given "Neutral rating, target price $117".

``` Goldman Sachs believes that although Oklo's stock price may remain high in the short term due to catalysts, fundamental uncertainties make its current valuation appear "rich," and suggests a neutral, wait-and-see stance. According to ZF Trading Desk, on September 24, the Goldman Sachs equity team released its first research report on Oklo, a leading small modular reactor (SMR) nuclear power company. The report points out that Oklo is in a golden track driven by a nuclear renaissance and AI-powered electric demand boom, holding the industry's largest pipeline of intent orders and facing many potential positive catalysts in the future. However, its current stock price seems to have "basically priced in" these expectations. Goldman Sachs believes that **a lofty valuation, massive funding requirements, key fuel supply bottlenecks, and still-pending operating licenses are four major overhangs**. Specifically: - **Huge orders have not yet turned into real money:** Although the customer backlog is impressive, all are non-binding intents. The company has not yet signed any legally binding Power Purchase Agreements (PPAs). - **Massive financial black hole of the 'own and operate' model:** The company has adopted an asset-heavy "own and operate" model, which retains strong control, but is expected to require up to $14 billion in capital before the mid-2040s, posing extremely high financial risks. - **Critical fuel bottleneck:** Its advanced reactors rely on High-Assay Low-Enriched Uranium (HALEU) as fuel, for which the global supply chain is currently extremely tight. This is not only Oklo’s, but the entire advanced nuclear industry's "Achilles' heel." - **Uncertainty in license approval:** While the company plans to submit a combined license application in Q4 2025 and expects the approval process to be shortened, this remains a 2-3 year, uncertain key hurdle. Therefore, Goldman Sachs has given a "Neutral" rating and a target price of $117. In the past month, the company's share price has risen more than 84% to $131.17, about 11% above Goldman's target price. [Image] ## Leader at the industry’s forefront, but promises not yet delivered Goldman Sachs first affirms Oklo’s era-defining opportunity. Against the backdrop of global energy transformation and surging data center electricity demand, nuclear energy is seeing a revival as a reliable, carbon-free baseload option. From the 2024 US ADVANCE Act to the May 2025 executive order to revitalize US nuclear industry, policy support (including accelerated permitting and reduced costs) is paving the way for nuclear energy companies’ development. **As a leading domestic US company, Oklo is well positioned to benefit with its sodium-cooled fast neutron reactor technology, "Aurora Powerhouse."** Goldman Sachs highlights that Oklo has built up over 14 GW of potential customer orders, far ahead among nuclear peers, with customers spanning data centers, oil & gas, and more. The company even maintains a good relationship with leading AI company OpenAI, which creates room for future collaborations. However, Goldman points out a key flaw behind this impressive list: **All agreements are Letters of Intent (LOIs) or non-binding contracts.** The only substantial progress is a $25 million prepayment from Equinix; but in Goldman’s view, this may not even cover 10% of the cost of a single 75 MW reactor. **Until a final PPA is obtained, the value of this 14 GW order backlog remains on paper.** ## Huge financing pressure under an asset-heavy model Unlike most peers who only provide technology and design, Oklo has chosen an "own and operate" business model. This means the company is fully responsible for every stage, from technology design, license applications, construction, all the way to final operation and maintenance. **This model brings stronger operational control, but is also accompanied by high financial risk and capital intensity.** Goldman Sachs estimates that by the mid-2040s, Oklo will cumulatively need to raise about $14 billion to support its operations and expansion, during which it will continue to "burn money" and **rely heavily on capital markets**. This huge sum will be gradually filled through equity, corporate bonds, government loans and project finance. By comparison, asset-light players like NuScale, who only deliver technology, require much less capital. In addition, to meet its large capex needs, Goldman expects Oklo will need to raise about $4.2 billion in equity, meaning **existing shareholders will face ongoing equity dilution risk**. ## Supply bottleneck for high-assay low-enriched uranium (HALEU) fuel **Goldman Sachs believes fuel supply is the weakest link in Oklo’s ambitious plan.** According to Goldman’s estimates, **based on Oklo’s deployment plan, by 2035, its HALEU demand will account for 3% of current global natural uranium supply; by 2050, that ratio will jump to 12%.** This means that if Oklo and other HALEU-dependent nuclear firms are to achieve commercial deployment, today’s fuel supply system is totally insufficient, requiring large-scale investment and expansion. Though Oklo is pursuing a **"three-pronged" fuel strategy – using newly enriched HALEU, down-blending weapons-grade nuclear material, and recycling nuclear waste**, including plans for a $1.7 billion fuel recycling facility, these plans will take years to materialize and add to capital burden and execution risk on vertical integration, since historically, the cost-effectiveness of nuclear fuel recycling has always been disputed. ## The long road to licensing, and uncertain commercialization timeline Although Oklo is ahead on technology and partnerships, full commercialization depends on a crucial hurdle: obtaining approval from the US Nuclear Regulatory Commission (NRC). The company plans to submit a combined operating license application for its 75 MW Aurora Powerhouse in Q4 2025. Goldman Sachs believes this will be a key catalyst; Oklo has chosen a customized combined license path, **which in theory could shorten approval time from the traditional several years to 24-36 months.** However, **Goldman Sachs emphasizes that this is only an expected timeline, with no guarantee of approval on schedule, or even at all**. The company was rejected once by the NRC in 2022 due to insufficient information. The company targets the first commercial reactor (at Idaho National Laboratory) to be operational by late 2027 or early 2028. **This timetable is heavily dependent on NRC review progress, and any delay will postpone revenue generation.** ## Goldman’s Valuation Goldman ultimately gives a Neutral rating and $117 target price, based on a 50/50 blend of EV/EBITDA analysis and Discounted Cash Flow (DCF) valuation. Notably, since Oklo will have no revenue before 2027, Goldman’s valuation model is highly reliant on distant forecasts. Specifically: - **EV/EBITDA method** uses a 50x 2035 EBITDA multiple discounted 9 years at about a 15% weighted average cost of capital. - The **DCF method** extends out 25 years to 2050. This means the current stock price is derived from expectations far into the future. In short, Oklo’s story brims with imagination, but the road from dream to reality is filled with obstacles that require vast capital, technical verification, and regulatory approval. Goldman Sachs believes that unless these major uncertainties are clarified, the current valuation already appears "rich." ~~~~~~~~~~~~~~~~~~~~~~~~ The above wonderful content comes from [ZF Trading Desk](https://mp.weixin.qq.com/s/uua05g5qk-N2J7h91pyqxQ). For more detailed interpretations, including real-time commentary and frontline research, please join [ZF Trading Desk Annual Membership](https://wallstreetcn.com/shop/item/1000309). [Image] Risk Warning and Disclaimer The market involves risks, investment needs caution. This article does not constitute individual investment advice, nor does it take into account the specific investment objectives, financial situation or needs of any particular user. Users should consider whether any opinion, viewpoint or conclusion in this article fits their individual circumstances. Invest accordingly at your own risk. ```