Oklo stock analysis: Is it a buy or sell as insiders continue selling?

Oklo stock rose nearly 4% in premarket trading, extending the 12% gain from the previous session. The rebound came as investors returned to small modular reactor (SMR) stocks, including NuScale. However, Oklo still faces significant risks, which helps explain its elevated short interest and continued insider selling.

Top insiders have been selling Oklo stock

While Oklo stock has rebounded this week, it remains well below its all-time high of $194.26. The sharp sell-off has been highly profitable for short sellers, with the FT estimating that investors betting against companies in the industry have made more than $2 billion.

Top insiders have been selling their shares, which is usually a red flag. Barchart data shows that insiders have made 13 sales in the last three months, selling 641,806 shares in this period. At the current price, these shares would be worth over $22 million. They have made 53 sell orders of 4.3 million shares.

Some of the most aggressive sellers are insiders like Caroline Cochran, the COO, Jacob Dewitte, the Chair and COO. In most cases, insider sales is usually a red flag for a company.

Oklo faces some major risks ahead

Oklo, a company in the small modular reactor industry, faces some major risks and opportunities ahead. The main opportunity is the fact that demand for reliable power is rising, especially amid the ongoing artificial intelligence boom.

This demand is evident in the number of deals that Oklo has signed in the past. It signed a 12 GW deal with Switch, a data center operator. It also signed a deal with Meta, Equinix, Diamondback Energy, and Centrus Energy. These deals will help it monetize its technology in the coming years.

The risk, however, is that Oklo’s business is still unproven and the company is losing substantial sums of money. Its most recent results showed that its revenue was just $1.2 million, with its net loss rising to over $48 million. It made a net loss of over $24 million in the same period last year.

This risk explains why analysts have reduced their estimates recently. Citigroup’s Vikram Bagri slashed his target from $76 to $57, while Truist’s Christopher Souther, lowered it from $55 to $51. As a result, the average estimate of $85 is lower than $88, where it was last month. It also explains why its short interest has been rising, reaching 21% today.

Oklo chart | Source: TradingView

The daily chart shows that the Oklo stock bottomed at $36.60 on July 29 to the current $44.27. It has retested the important resistance level of $45.21, its lowest level on April 7 this year.

The stock has remained below the 50-day Exponential Moving Average (EMA), a sign that bears remain in control for now. It has also remained below the Supertrend and the Ichimoku cloud indicators.

Therefore, the stock will likely remain under pressure in the foreseeable future as dilution concerns remain. If this happens, it may drop further to the key support level of $20.