Gevo, Inc. (NASDAQ: GEVO)
Gevo has been an incredibly interesting stock to watch as of late. Recently, the company’s shares have been soaring in price. However, it is racing the clock. If share values don’t get to $1 each by July 25th, the company faces being delisted from the NASDAQ. Nonetheless, I have to say that I’m not concerned. In fact, I see no reason why the company wouldn’t be able to reach this mark. Today, we’ll talk about why I, along with many others, maintain such a bullish opinion of GEVO.
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GEVO Has The Right Product At The Right Time
Let’s face it, it doesn’t matter what company you’re talking about, a company really isn’t a company without a product to sell. When it comes to Gevo, the company has the right product at the right time.
The company is focused on the manufacturing of biofuels and other renewable chemicals. One of the most notable chemicals is called isobutanol. To create this, GEVO came up with a technology that includes metabolic engineering, synthetic biology, chemical engineering and chemistry. Through their technology, they have been able to create isobutanol and other renewable fuels from discarded feedstock.
At the moment, the global view on how energy and fuels are generated is changing. Over the years, we have noticed the effects of greenhouse gasses on our planet. Unfortunately, the effects have been anything but positive. As a result, governments, businesses, and even consumers are looking for ways to reduce their carbon footprint on our planet. This falls right in line with the goals and products at GEVO. As a result, the company is perfectly positioned for big gains to come.
Customer Contracts Make The Stock Appealing
Gevo hasn’t just been sitting around creating renewable fuels. Let’s face it, having a great product is awesome, but you have to sell that product to make money. Well, the company isn’t lacking in this area either. In fact, since 2011, the company has been creating agreements with some great customers. One of them is the United States Military. Outside of the military, here are some of the other agreements we’ve seen since 2011:
Companies That Signed Agreements With Gevo In 2011
- Mansfield Oil Company of Gainsville
- Land O’Lakes Purina Feed LLC
- The Coca Cola Company
- Northwest Advanced Renewables Alliance
Companies That Signed Agreements With Gevo In 2014, 2015 and 2016
- Total Additives & Special Fuels – 2014
- Alaska Airlines – 2015
- BCD Chemie – 2015
- Musket Corporation – 2016
As you can see from the list above, GEVO has compiled an incredibly compelling list of customers to date.
This Test Could Send Sales Skyrocketing
Most recently, we’ve seen quite a bit of news about Alaska Airlines when looking up Gevo, and for good reason. Under the agreement Alaska Airlines signed with the company in 2015, when Gevo’s jet fuel made it through the regulatory process, it would be used in test flights. Two test flights were recently run using the renewable jet fuel.
At this point, we are awaiting the results of these test flights. Obviously, the jets that were used in the tests landed safely, but we do not know key details. Details including how the fuel performed, how the jets reacted to the fuel, and more are expected to become available relatively soon.
This could be absolutely huge for GEVO. If the two test flights went well, we can expect that Alaska Airlines will start using the renewable jet fuels in commercial flights. This would send the company’s sales of renewable jet fuels skyrocketing.
This Could Just Be The Tip Of The Iceberg
However, I don’t think it would stop there. If Alaska Airlines does start using Gevo’s renewable jet fuel, it will be able to say that it is the first airline to fly on renewable fuels. This would be great for Alaska Airlines, as it will make the company more appealing to consumers.
Of course, when competition sees one company making money on something, they want to jump in too! In this particular case, if the test flights prove to have gone well, and Alaska Airlines does start to use the renewable fuel, leading to increased sales, other airlines will likely start to create agreements with GEVO as well. The implications with regard to sales potential could be absolutely massive!
Isobutanol Agreement Also Supports Growth In GEVO
Another major factor to consider here is a recent agreement surrounding isobutanol. As mentioned above, isobutanol is a renewable fuel the company created using proprietary technology. Now, it looks like this product is going to climb in a big way too. Recently Gevo signed an agreement with the Musket Corporation.
Under this agreement, the Musket Corporation will be using isobutanol in gasoline blends. At first, the blends will be designed for marine and off road indications. Nonetheless, this is expected to expand further.
One of the most important parts of this agreement is who the Musket Corporation is. You see, they are one of the larger distributors in the Love’s Family of Companies. Love’s is massive and gives GEVO great reach into the fuels market. In a statement, Dr. Patrick Gruber, Chief Executive Officer at Gevo, had the following to say with regard to the agreement:
“We believe Musket is an excellent partner to expand the use of isobutanol in gasoline blends, as our isobutanol production at Luverne builds. Musket and Love’s are significant players in fuel distribution and retail in the U.S., so they have great reach to get our isobutanol into the market…”
The Bottom Line
At the end of the day, I can understand why some are concerned about GEVO. If the stock doesn’t reach $1 per share soon, it faces being delisted from the NASDAQ. Nonetheless, it’s got a month to get there, and with recent gains and fundamental news, I see no reason why it wouldn’t reach this mark. All in all, the company is well positioned for growth as its products fall in line with global needs. I’m expecting to see long-run gains in the stock.
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What Do You Think?
Where do you think GEVO is headed moving forward? Join the discussion at TalkTRENDZ from CNA Finance!
[Image Courtesy of PEXELS]