Gevo Inc (NASDAQ: GEVO) is headed for the top in the market this morning, following up on the recent gains that we’ve seen out of the stock. While the company hasn’t issued any news either by press release or SEC filing, there’s good reason to be excited about the future of the company.
Here’s what’s happening:
Investors Are Chatting About GEVO
Regardless of which social network you use, if you search for posts about Gevo, you’re going to find that there is no shortage. The fact of the matter is that the stock is hot with the retail community, and for several good reasons.
First and foremost, there’s been a lot of chatter surrounding the idea that if the world shifted to clean fuels, it would lead to a shortage of food as feedstock must be used to create these fuels. However, a recent post on Gevo’s blog holds that idea to the fire.
In the post, available here, gevo outlines the process it uses to create sustainable fuels, which all starts with No. 2 corn, also known as dent corn, that is not up to par for human consumption. Once the corn is received it undergoes a process to separate the protein and starch, which is then used to create high protein animal feed.
What’s left of the corn is then processed into energy-dense liquids that can be processed into sustainable aviation fuel as well as premium quality sustainable gasoline. Not only are these fuels sustainable, they don’t release fossil-related carbon into the atmosphere.
Importantly, the argument was that if the corn is used for fuels, there will not be enough for animal feed. However, in the article, one thing was made clear. The company isn’t just producing sustainable fuels, but producing high-quality animal feed in the process.
That’s Not The Only Reason Investors Are Excited
There’s more to the excitement than the fact that the use of feedstock won’t lead to a shortage in human food.
The fact of the matter is that President Joe Biden recently released his plans to reshape the United States economy, energy industry, and other areas, with the energy industry being the biggest focal point on the list.
Under Biden’s plan the United States would shift from burning fossil fuels as a way to generate energy, run vehicles, and more, to clean energy solutions such as solar and wind energy and electric vehicles.
As the world works to shift away from the burning of fossil fuels, there couldn’t be a better time to invest in Gevo.
At the moment, the transportation industry seems to be stuck on battery powered vehicles. However, there are significant issues with that concept:
- Batteries Cannot Run Airplanes. At the moment, there is no electrical system that’s strong enough to keep a passenger airplane airborne. Only one sustainable fuel has been proven effective in doing so, and that’s the fuel offered up by Gevo.
- Electric Vehicles Aren’t A Good Fit For Many. Electric vehicles have their limitations. At best they can only be driven for a few hours before the user must charge the vehicle, which takes hours itself. So, for those that drive long distances, electric vehicles won’t work. Beyond that, there’s a massive percentage of the American population that can’t afford to buy a new car. That’s why the used car market is a booming one. For this portion of the population, electric vehicles are out of reach. Finally, there’s a certain level of comfort to keep with traditions. Traditionally, drivers filled their tanks with gasoline and would be on their way in a matter of minutes. No other clean energy alternative has the potential to keep with this tradition than the one offered by Gevo.
No matter how you slice it, there will be a need for the fuels produced by Gevo for years to come. In fact, I would venture to predict that considering how far ahead of the competition the company is, it will quickly become the leader in clean, sustainable fuels as the world makes the shift away from gasoline and into more environmentally friendly options.
There is one concern investors have about Gevo, and it’s an extremely valid one. The company has been burning through cash as if all it needs to do to access more is pick it off of a tree.
Many argue that should the company keep throwing cash to the flame, it won’t have enough to reach its goal of becoming a massive, profitable clean fuels operation.
However, I beg to differ.
The fact of the matter is that some of the greatest companies in the world today went through the same issue. Early on, the infrastructure buildout is an expensive process. It’s the same process that led to people calling Jeff Bezos crazy when he went on an Amazon.com-fuelled spending spree to build out the infrastructure for what would become the world’s leading e-commerce company.
Ultimately, solid infrastructure lays the groundwork for solid growth. So, while many are pointing the finger at Patrick Gruber, CEO of GEVO, saying that he’s spending too much cash and will never reap the rewards, in my view, he’s following along the lines of some of the greats and will likely quickly join them as a result.
The Bottom Line
The bottom line here is simple. Gevo has been working for years to develop clean fuels, and it has done an impeccable job of doing it. At this point, there’s little holding the company back from becoming a cornerstone in the push to move away from fossil fuels and toward more environmentally friendly options in the travel industry.
As a result, the long-term opportunity here is hard to ignore.