Gevo Inc (NASDAQ: GEVO) is a stock that I’ve been following for years now, and given political tides, I believe that there’s plenty of opportunity ahead. However, with the company’s recent financial results missing the mark in terms of revenue, many are wondering if the ship has sailed on this opportunity.
In my view, that’s not the case.
In fact, I believe that the recent declines in the value of the stock set the stage for a tremendous opportunity. Here’s how I see it:
What Is Gevo?
Gevo is a renewable fuels company. For the past several years, the company has been working on, and perfected, a way to turn renewable feedstocks into a product known as isobutanol.
That isobutanol is then refined and turned into fuels.
The flagship fuel created by Gevo is a sustainable aviation fuel that has been through all the testing required to move forward. In fact, the fuel has already been used in commercial flights and has been the center of billions of dollars in supply agreements – which we’ll talk about later.
Nonetheless, aviation fuel isn’t the only sustainable fuel being developed by the company. The company is also selling off road fuels for tractors, ATVs, boats, and more, all of which are manufactured using isobutanol derived from renewable resources.
Why I’m Not Concerned About the Revenue Miss
As mentioned above, Gevo recently missed the mark when it comes to revenue, and it did so in a big way. This led to serious declines following the company’s financial results, but I’m not concerned.
In fact, I see the declines as an opportunity.
The reality is that those focused on revenue growth at this stage in the game are missing the mark in a big way.
Keep in mind, last year, and in the beginning of this year, the company has been signing supply agreements to supply billions of dollars of its sustainable aviation fuels to the market. While some expected that these agreements would lead to a substantial increase in revenue, they don’t actually kick off for months, and in some cases, a couple of years to come.
This creates an opportunity for the company.
You see, it’s clear that demand is climbing for the company’s fuels as a result of the supply agreements the company has signed. Now, the company needs to focus on building out its infrastructure in order to provide the supplies of sustainable aviation fuel it has agreed to.
The first part of this infrastructure buildout is the Net Zero 1 facility. At the moment, the facility is under construction. Once completed, the company will be able to produce its sustainable jet fuel with net zero carbon emissions. So, it’s producing clean fuels in a clean way.
It’s also worth mentioning that the company has a compelling balance sheet. In fact, due to a fund raise earlier this year, it has all the money it needs not only to operate, but to build multiple production facilities.
Putting it all together paints a picture like what we saw in the early days of Amazon.com. Jeff Bezos knew that demand was there, but he also knew that infrastructure was important. So, he went on a spending spree, building out his infrastructure, leading his company to become the king of e-Commerce.
That’s what Gevo’s doing today, and I believe that it will become the king of sustainable aviation fuel as a result.
What’s Ahead for the Company?
Moving forward, things are looking great for Gevo. Not only is demand climbing as can be seen through the supply agreements the company is signing, political changes in tides will likely lead to further growth.
Keep in mind, President Joe Biden is a proponent of clean energy, and the democrat controlled congress and senate share the same views.
As a result, tax cuts, grants, and increasing demand are likely to be the story for the company moving forward.
So, what we have here is a company that has come up with a way to create sustainable fuel, built demand around its product, started a major infrastructure buildout, and now has the support of politicians in the United States and around the world.
Ultimately, things couldn’t be going better, and GEVO stock is likely to see significant gains ahead.
What Analysts Think About GEVO Stock
While there aren’t many analysts covering Gevo at the moment, those that are, seem to love the stock. According to TipRanks, there are two analysts covering the stock, both of them rate it a Buy.
Price targets on the stock are $16 and $18, with a median target of $17. That price target suggests there’s room for tremendous growth ahead.
The bottom line here is simple. Those that make money in the market buy when fear is high and sell when greed sets in.
Not only is fear surrounding Gevo high at the moment, the company is setting the stage for compelling growth. As a result, the recent declines on the stock may represent a discounted opportunity to get in on significant gains that are likely ahead.