Gevo Inc (NASDAQ: GEVO) has become a hot topic as of late, and chances are, it’s only going to heat up further. The stock is ticking up on no news this morning, but what’s the need for news when the stars are aligning just right for the company?
Here are three things that investors need to know about Gevo:
1. Gevo’s Sustainable Fuels Will Quickly Become A Hot Commodity
For those of you who haven’t been following Gevo, the company has developed technology and a process to turn renewable feedstock into a proprietary compound known as isobutanol. That isobutanol is then used to develop fuels, most notably, sustainable aviation fuels.
There’s no question that sustainability is a major topic in the United States and around the world at the moment. With experts pointing to global warming and leaders around the world urging consumers, businesses, and government agencies to go green in order to produce the future of our planet and its inhabitants, demand for sustainable fuels is only likely to increase.
This potential growth in demand is only exacerbated by the change in guard that took place in Washington DC as a result of the 2020 election season.
President Biden and his friends in the democrat party have long been proponents of clean energy, and that’s not likely to change. What has changed is the fact that they now have complete control in Washington DC. As a result, clean energy companies, including Gevo, can look forward to potential tax cuts, government funding, and increasing demand as incentives are given to those that go green.
All told, even without President Biden and the democrat party’s control in Washington DC, clean and green was going to be a major topic, leading to increasing demand for sustainable fuel, solar, and wind power companies. Nonetheless, with the change of guard in the country’s capital, this shift to clean and green is likely to happen much faster, making the sustainable fuels being developed by Gevo a hot commodity.
2. Major Airlines Commit To Carbon Neutrality
Recently, I came across this article one Reuters. According to the article, Airlines of America, a group that represents the major airlines in the United States, has committed to carbon neutrality by the year 2050. This means that major airlines in the United States are going to have to think of out of the box ways to reduce their carbon footprints.
How exactly do you think they’re going to do that?
Well, electric vehicles may work on the road, but with the tremendous power needed to keep huge hunks of metal, known as airplanes, in the air, electric engines just don’t make sense. Combustible fuels must be the way to go.
Well, that bodes very well for Gevo. Not only is the company’s aviation fuel sustainable, it burns much cleaner than currently available options. Moreover, the company is able to develop the fuel with zero emissions, making it even more appealing to airlines looking to make a meaningful environmental change.
So, if you thought that Gevo fuels weren’t going to garner the attention of airlines in the future, you’re wrong. The fact is that in the United States, major airlines have made a commitment that all-but guarantees increasing demand for the company’s sustainable aviation fuels, setting the stage for potentially dramatic growth in the future.
3. Gevo Isn’t Just An Aviation Fuel Play
Sure, sustainable aviation fuel is the flagship product at Gevo at the moment, and will likely be for some time to come. However, there’s another market for the company to tap into, and that market is far larger than sustainable fuel for airplanes.
It’s the gasoline market.
Recently, we’ve seen increasing demand for electric vehicles as consumers look to go green. However, even with the increasing demand, electric vehicles only represent a small percentage of the new vehicles being purchased in the United States. Moreover, there are significant challenges that EVs will have to overcome to become a dependable option for the masses:
I recently heard a chatting head on television talking about the feasibility of electric vehicles. While I try not to pay too much attention to the bobble heads on news networks, I did find what this guy was saying to be interesting. Essentially, he explained that for electric vehicles to really take off, companies would have to find a way to charge them as quickly as it takes to fill a gas tank.
This makes a ton of sense.
The fact of the matter is that human beings are very impatient creatures. Don’t believe me? Think about the fact that fast shipping times led to Amazon.com being the leader of online retail, driving billions of dollars in revenue per quarter, or simply think of how you feel when your server takes too long to refill your drink.
The fact is that long charging times are a major issue with electric vehicles as we know it, and will need to be addressed for them to be appealing to the masses.
Electric vehicles simply don’t make sense in rural communities. Ultimately, in these communities, consumers have to travel longer distances to get their hands on the things they want and need. Moreover, you’re not going to find charging stations in the middle of the sticks.
I personally live in a rural community. Sure, I have a Walmart and a McDonald’s, but if I want to go to the mall, I will need to drive an hour to a small town with one. Even that small town isn’t likely to have charging stations, and given the current range of electric vehicles, I’d really be pushing the limits on the ride home.
So, while I like the stylish look of a Tesla, I don’t see myself owning one any time soon.
There’s a large percentage of the United States population that drives older, used cars. It’s not necessarily something they want to do, but purchasing a new car is an expensive endeavor, one that many simply can’t afford to take part in.
For these consumers, even if they wanted an electric vehicle, these vehicles are out of reach. Which means a different approach is needed if clean transportation is the way of the future.
So, getting back to the fact that sustainable fuel isn’t the only rabbit in Gevo’s hat, the company has made fuels for off road vehicles like boats, ATVs, and other toys that guys like me enjoy quite a bit. There’s no reason to expect that a sustainable alternative to gasoline isn’t on its way.
The reality is that for the many reasons listed above, electric vehicles aren’t likely to be the answer to clean consumer transportation. Instead, sustainable, clean burning fuel makes more sense, and there’s no reason to expect that Gevo isn’t interested in tapping into that market.
The Bottom Line
The bottom line here is simple. If Gevo were only an aviation fuel play, it would be an appealing stock considering the change in tides in the energy and transportation sectors. Adding icing to the cake, if you look at other areas of transportation where the company’s likely to shine, including off road and on road gasoline applications, the company quickly becomes hard to ignore.
All in all, Gevo stock is one that’s worth your attention.