Why Oklo Stock Popped Wednesday

Oklo (NYSE: OKLO) stock, the start-up manufacturer of small modular (nuclear) power reactors, surged early in January after Meta (NASDAQ: META) announced a deal to prepurchase power ... from plants that Oklo hasn't yet built. (Meta's cash will actually be used to build the plant.)

Today, Oklo's gaining 2.2% through 9:50 a.m. ET. And the reason is a new upgrade from Bank of America analyst Dimple Gosai, who recommends buying the stock at up to $127 per share.

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Why BofA loves Oklo stock

Gosai calls the deal "a firm, binding agreement with Meta to develop a phased ~1.2 GW advanced nuclear campus" to power Meta's artificial intelligence data centers. StreetInsider.com quotes Gosai saying the contract "provides tangible proof of execution and counterparty commitment."

Oklo boasts some 14 gigawatts-worth of nuclear projects in its pipeline, which is a great start. As Gosai tells it, though, with profits from nuclear stocks still years away, what nuclear investors are really looking for is "tangible evidence advanced nuclear is moving from concept to execution" -- and that this backlogged work will eventually turn into revenue and profit.

"We think this agreement provides exactly that," says the analyst.

Is Oklo stock a buy?

As I explained in a previous column, the 1.2GW deal with Meta should produce on the order of $1.3 billion in annual revenue for Okta at current electricity rates in Ohio. That won't even begin to happen until the plants are built and operating in 2030, however. And full capacity -- and full revenue -- won't be reached before 2034.

With $920 million in cash already, and customers now paying up to pre-buy power, Oklo probably has the cash to survive until then. The question is whether investors have the patience to wait nearly a decade for Oklo to produce profits.

Rich Smith has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.