Gevo Inc (NASDAQ: GEVO) is having a rough start to the trading session in the premarket hours this morning, trading down more than 6% in the premarket. However, I’m here to tell you that this movement is to be expected. With the overall market down this morning on low economic figures, traders are taking profits, offering up a discount on future gains. Here’s what’s going on:
Skip to What You Want to Read
- Why GEVO Stock Is Down This Morning
- Why This Is an Opportunity
- What’s Ahead for GEVO Stock
- What Analysts Think About GEVO Stock
- Risks to Consider Before Buying GEVO Stock
- Final Thoughts
Why GEVO Stock Is Down This Morning
As mentioned above, Gevo is falling in the market this morning, but with no news, many are wondering why. Are the declines a cause for concern?
Not in the least!
The declines are the result of the US durable goods numbers, which showed in January, durable goods orders grew by 0.2%, a sharp decline from the 0.9% growth in December. As a result, the stock market as a whole is trading in the red.
It’s during times like these that investors take profits among their largest gains, with plans to buy back into the stock later to take advantage of future growth. That seems to be the case with GEVO.
The fact of the matter is that Gevo stock has seen an incredible run for the top as of late. With the political climate changing, money rolling in, and plans to increase production capacity in a big way, the stars have been aligning perfectly for serious gains in the stock. So, a little profit taking off the top is to be expected.
Why This Is an Opportunity
One thing the profit taking today is doing is creating what I believe to be a major opportunity. With stock prices down more than 6%, investors are able to get in on the strong potential growth that’s ahead for a discount.
So, where is this growth going to come from?
As mentioned above, the political climate just took a major shift. President Joe Biden has moved into the White House and democrats have taken control over Congress and the Senate. This is important because the democrat party is the clean-energy party, and their control in Washington D.C. gives GEVO and its investors plenty to look forward to.
In particular, with a push to turn the United States green, chances are that GEVO will benefit from research grants that will help it to further improve its processes and production capacity. At the same time, the company is likely to benefit from tax cuts, reducing its overhead while increasing demand as those who use clean energy products are likely to enjoy tax cuts as well.
All of this adds up to high demand for clean energy, and in the space, there is no other company that’s as far ahead as GEVO is when it comes to clean, renewable fuels.
The company uses feedstocks like waste crops of corn or wood to create next-generation, clean-burning fuels that have been proven to be effective in traditional engines. That’s a big deal.
There’s a reason that electric cars only account for about 2% of US auto sales. People are creatures of habit and enjoy traditional ways of doing things. Consumers don’t want to have to look for a charging station after just 300 miles and wait hours to continue their road trip? No, they want to put a nozzle in the fuel tank and keep on rolling.
GEVO has developed a way to maintain tradition in travel while creating an opportunity to clean the space by greatly reducing carbon emissions through a clean-burning, renewable fuel. If you don’t see value in that, you need glasses!
What’s Ahead for GEVO Stock
Moving forward, I’m incredibly excited for the future of GEVO stock. Keep in mind, the company recently raised a boatload of funding which will be used to build its first net-zero production facility. Moreover, the funds are enough to build two of these production facilities and fund the company for several years.
As a result, what we’re looking at now is a growth story. The company has the technology it needs in place, money is there, and the political climate is great for the company.
All in all, I’m expecting for GEVO to become a cornerstone in the shift to clean, green energy, leading to compelling gains in demand, revenue, profits, and ultimately, the price of the company’s stock.
What Analysts Think About GEVO Stock
There aren’t many analysts covering GEVO, but what the company lacks in coverage, it makes up for in opinions. At the moment, two analysts cover the stock, with both analysts rating it a Buy.
The consensus price target is $10.50, which represents a decline. However, it’s important to remember that this coverage was updated prior to the turn of the new year, the change of guard in Washington D.C., and the company’s announcement of plans to construct a net-zero production facility and the funding needed to do so. As a result, I’m expecting to see price target increases relatively soon.
Risks to Consider Before Buying GEVO Stock
Investing comes with risk, that’s just part of the game. While I’m overwhelmingly bullish on GEVO stock, it’s important that you consider the risks before diving in. With that said, before making an investment, you should consider the following:
- Profitability. Gevo does generate revenue, but it’s not yet generating a profit as all the money it gets in, and then some, is being used to develop infrastructure. If the company can’t reach profitability prior to funds running dry, it may look to capital markets to raise funds, resulting in dilution of existing shareholder value and potentially significant declines.
- Speculation. A bet on GEVO stock is a speculative bet. While the stars seem to be aligning for the company to become a cornerstone in clean energy, nobody knows how long it will take for clean fuels to take off, or if they will ever take off. A bet on GEVO is a bet that the clean energy revolution will continue, and that consumers will eventually prefer the company’s renewable fuels to traditional fossil fuels.
- Politics. While Biden is our president and democrats own the Senate and Congress, there’s nothing certain in politics. Much of my bullish opinion is dependent on regulatory changes and a push by politicians for clean energy. If this doesn’t take place, significant declines may be the result.
The bottom line here is simple. The world is pushing for clean energy, looking for solutions to the climate change issues that are leading to stronger storms, bigger fires, and a hotter planet.
As the world looks for alternatives, GEVO is ready with an alternative that could greatly change the carbon emissions in one of the biggest pollution-rich areas, transportation. With the company already ramping up production, the political climate setting the stage for growth, and a leadership position in clean energy likely ahead, GEVO stock is one to watch closely!