Copyright fool
For the past couple of months, I've been fixated on the stock performance of nuclear start-up Oklo (OKLO +5.53%). The developer of small modular reactors (SMRs) has seen its shares go on an absolute roller coaster ride, rising 50% in September, hitting a high of $174.14 per share in October, and it's now down more than 30% from that high in November. What makes this roller coaster ride so interesting is that we don't know where the stock is likely to go in the short term, and that's why you may want to keep a close eye on it in the coming weeks. Nothing to see here A high-tech start-up experiencing share price volatility is nothing new. In fact, most tech start-ups experience at least a few wild price swings in their early years. This is especially true for companies in the "pre-revenue" phase of development, like Oklo. Currently, Oklo doesn't have any commercial operations. It's building a prototype of what it hopes will be its signature product, the Aurora Powerhouse SMR, in Idaho. But that prototype is unlikely to be completed until the middle of next year at the earliest. Until Oklo actually starts up its prototype and is able to see how it performs under real-world conditions, nobody -- not even the company's CEO, Jacob DeWitte, who started Oklo while still a PhD candidate in nuclear engineering at MIT -- knows whether things will go as planned, fail horribly, or succeed beyond anyone's expectations. Is Oklo stock cheap or expensive? Oklo's current market capitalization is about $18 billion, but when shares hit their October peak, it was valued at about $25 billion. That wouldn't necessarily be a high valuation for a company that's profitably churning out nuclear reactor facilities that can be co-located with energy-hungry data centers and deployed virtually anywhere without taxing the local electricity grid. But Oklo's a long way away from that point. With Oklo, investors should factor in the risks that the technology, once operational, won't be cost-effective to manufacture or won't perform as expected, and should be prepared for the share price to react accordingly (i.e., to drop like a lead balloon). However, that probably won't become clear for years, and in the interim, the stock may drop further or it might rise significantly higher, depending on overall perceptions about the nuclear industry. If the volatile share price tumbles to around the $100 per share range or lower on no significant news, the company's market cap would be less than $15 billion: a more reasonable -- although not cheap by any means -- valuation. Because I'm a fan of the science behind the company's technology, I'd feel much more comfortable adding to my existing position at such a level, although even I admit this investment is only for those with a very high tolerance for risk. Even though I'm bullish on Oklo's long-term prospects, I'd only invest money I'm not afraid to lose in this highly speculative company.
