What’s the Ceiling for the Quickly Emerging GEVO?
By: Andrew Martin
Tags: Investing, Renewable Energy, Money, Stock Market, Finance

Image via Unsplash- Jonathan Petersson

What’s the Ceiling for the Quickly Emerging GEVO?

The growing biofuel and renewable chemical company is starting to make some major noise on the stock market

New favorites appear on the stock market stage frequently. Some sputter and die away while others plug away and find financial glory. GEVO has recently thrown their hat in the ring for darling of the moment, seeing impressive gains in recent days. However, are they for real and if so, what might be their ceiling?

Headquartered in Colorado, according to Robinhood, “Gevo, Inc. Common Stock, also called Gevo, is a renewable chemicals and next generation biofuels company, which focuses on the development and commercialization of renewable alternatives to petroleum-based products.”

They are a smaller growth company of about 60 employees, who have been operating since 2005. With the election of the 46th President, Joe Biden, a reinvigorated emphasis has been placed renewable energy and resources in the United States and perhaps abroad.

GEVO offers an impressive and diverse array of products, which include but aren’t limited to renewable gasoline and biodiesel, sustainable aviation fuel, ethanol and high-protein animal feed. Their line focuses on decarbonization to give their creations the lowest carbon life-cycle assessment (LCA) possible. This LCA is seen as the most effective method of measuring true carbon intensity in biofuels and chemical with the lower levels benefitting the environment.

As more and more businesses and communities search for ways to reduce their carbon footprints, companies like GEVO are there to help transition into a new age. Contracts are continuing to be accumulated by the company, including a deal for their renewable gasoline in Seattle, where they have a long-term pact.

A look at the balance sheet shows unprofitable numbers over the past years. However, a deeper dive makes it easy to identify a number of reasons for optimism. The company projects to grow revenue by 24.05% per year (however, they may not reach profitable status until 2023), which a steady and healthy trek upwards.

Earlier this year, GEVO also inked a $1.5 billion long-term renewable hydrocarbons purchase and sale agreement with Trafigura Trading, LLC, who will start to annually market and sell 25 million gallons of renewable hydrocarbons beginning in 2023. This provides a solid base of income in the coming years, as they work to add many more similar deals.

GEVO has also made admirable progress regarding its assets and debt. During its 2020 second quarter earnings, they reported not only improving their cash and cash equivalents from $6.3 million just the year before to $80.6 million this year. Most importantly, they also expect to pay off the remainder of their approximate $12.7 debt balance by the end of 2020. A company with no debt and a steadily increasing stockpile of cash and war chest of lucrative contracts is a recipe most enterprises can only dream of achieving.

Investors are just starting to recognize the potential and power of GEVO. With share prices sitting at around $1.90 on December 1st earlier this month, they have risen almost 275% since then with the price at $5.20 as of the end of after-hours trading on December 28th. This has allowed them to exceed analyst predictions, which projected them to reach $5.00 by the end of this year.

President Elect Biden has spoken extensively on his intent to pursue a more environmentally friendly agenda than the current Trump administration. While GEVO certainly hasn’t cornered the market, their rosy financial outlook, variety of products and emerging place in the market seemingly have them in an envious upward trend as we head into 2021.

GEVO has gone from almost all projection to making tangible strides. The proof will be in the pudding once their contracts continue to accumulate and they begin to get into production and delivery in earnest. However, it’s hard not to like what they have going on. As more bricks fall (or don’t fall) into place, the picture will become clearer as to where the company’s stock price is headed. The current excessive bullishness could be simply a taste for things to come. Only time and continued careful monitoring of this emerging company will tell, but as things stand today, it’s starting to command your attention and consideration as a potential long-term investment.

DISCLAIMER: The author is not a financial advisor or expert. The opinions expressed in this article are for general educational purposes and entertainment only and are not intended in any way to provide specific advice or recommendations for any individual or on any specific security or investment product. Individual investors are responsible for their own money and investment decisions. The author holds a small position in the product discussed in the article.