Oklo Stock: Buy, Sell, or Hold?

Oklo (NYSE: OKLO), a nuclear power start-up backed by OpenAI CEO Sam Altman, went public by merging with a special purpose acquisition company (SPAC) on May 10, 2024. The stock opened at $15.50 on its first day but eventually plunged and closed at $8.45.

Oklo's stock eventually sank to an all-time low of $5.59 on Sept. 3, but it subsequently soared to about $42 as of this writing. That massive rally would have turned a $10,000 investment into more than $75,000 in less than five months. Let's take a closer look at Oklo's business and see if it's the right time to buy, sell, or hold this volatile stock.

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What does Oklo do?

Oklo was founded in 2013 by MIT graduates Jacob DeWitte and Caroline Cochran. Sam Altman, who owned a 2.6% stake in the company at the time of its public debut, served as its CEO for three years before handing the reins to DeWitte in 2024. Altman remains on board as the company's chairman and is still the person most closely associated with its brand.

Oklo develops microreactors that run on metallic uranium fuel, which is denser and cheaper to fabricate than traditional uranium fuel pellets. This process produces minimal carbon emissions, while traditional nuclear power plants can emit between 2 to 130 tons of CO2 per gigawatt hour (GWh) of energy produced.

Oklo's flagship microreactor, Aurora, costs $70 million and can generate 15 megawatts (MWe) of electricity. By comparison, the construction cost of a traditional nuclear reactor is $5,500 to $8,100 per kilowatt (kWe), so it would cost $82.5 million to $121.5 million to build a comparable 15 MWe reactor. Oklo's Aurora reactors can be scaled up to 50 MWe, and they can operate for more than 10 years without being refueled.

Oklo started working with the U.S. Nuclear Regulatory Commission (NRC) back in 2016. The U.S. Department of Energy (DOE) then approved its permit to build its first reactor in Idaho in 2019, and the DOE granted it additional design and environmental approvals over the following years. However, it doesn't expect to bring its first reactor online until 2027.

So how do we value Oklo's stock?

Without any revenue, Oklo is a difficult company to properly value. It also didn't present any long-term revenue or profit forecasts during its pre-merger presentation in 2023. Therefore, it's hard to tell if this company, which has an enterprise value of $4.5 billion, is undervalued or overvalued.

The bulls believe its revenue will soar once it deploys its first reactors and scales up its business. It should also benefit from the expansion of the adjacent small modular reactor (SMR) market. Big tech companies like Alphabet's Google and Amazon are already ramping up their investments in SMRs to support their rapidly expanding data centers, and the DOE recently greenlit up to $900 million in cost-shared funds for the development of more SMRs.

Over the past year, Oklo has signed new data center partnerships with the U.S. government as well as the natural gas and backup solutions provider RPower. It's also reportedly exploring a potential partnership with the nuclear fuel company Lightbridge (NASDAQ: LTBR). All of these deals -- which caused its pipeline (as measured by its letters of intent) to roughly triple to 2,100 MW since July 2023 -- could set up some firm foundations to rapidly expand its business beyond its initial project in Idaho.

With a single $70 million microreactor generating 15 MW of electricity, 2,100 MW of power would translate to roughly $9.8 billion in sales for Oklo. Yet it could take years for it to actually recognize all of that revenue -- and it will continue racking up losses and burning more cash until that happens. On the bright side, Oklo won't go bankrupt anytime soon, since it ended its latest quarter with $288.5 million in cash and equivalents with a low debt-to-equity ratio of 0.1.

Unfortunately, Oklo's insiders and top investors don't seem that enthusiastic about its future. Its insiders were net sellers over the past three months, while Cathie Wood's Ark Invest has been pruning its ETFs' positions in Oklo since last October.

Is it time to buy, sell, or hold Oklo's stock?

Oklo, just like the SMR builder NuScale Power (NYSE: SMR), is still a highly speculative investment. Its technology sounds incredible, but I wouldn't touch its high-flying stock until I see it make some more progress toward deploying its first reactor. Its pipeline certainly looks healthy with so many letters of intent, but those letters don't equal guaranteed revenues yet. Therefore, this is still a stock to either sell or avoid until the near-term hype cools down.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.