Gevo Inc (NASDAQ: GEVO) is headed up in the market this morning, making up for some of the declines we saw on the stock late last week. While there has been some profit taking recently, there are plenty of reasons to be excited about Gevo’s future.
Here’s what’s happening:
Skip to What You Want to Read
- What Is GEVO?
- Why This Stock Could Become a Blockbuster
- Recent Developments Make the Stock More Exciting
- What Analysts Think About GEVO Stock
- Risks to Consider Before Buying GEVO Stock
- Final Thoughts
What Is GEVO?
Gevo is a renewable fuels company that has a core focus on jet fuels. However, the company’s renewable, clean-burning fuels are also used in various off-road vehicles like boats, ATVs, and more.
Throughout the years, GEVO has been working to perfect a way to turn waste feedstock like waste wood and food into usable, clean-burning fuels. All in all, the company has done just that.
To date, Gevo fuels have been used in commercial flights, have been the center of billion-dollar agreements, and have garnered attention from consumers and government agencies alike. Now, it seems like the opportunity is only growing stronger.
Why This Stock Could Become a Blockbuster
All told, I believe that Gevo has the potential to become a blockbuster for two big reasons:
The Political Climate Bodes Well for the Company
First and foremost, the political climate change in the United States that took place during the 2020 election season is great news for GEVO. Previously, with the Trump Administration in the White House and republican control in Washington DC, clean energy was the last topic on the agenda. However, that’s all changed.
Today, the democrats have control in Washington DC, with Joe Biden holding the presidency and democrat control in both Congress and the Senate. For some time now, President Biden and the democrat party have been pointing to the damaging effects of carbon emissions and the changes that need to take place in order to reduce the harmful environmental effects.
As a result, moving forward, we’re likely to see quite a bit of legislation surrounding clean energy, which is great news for GEVO. In particular, I’m expecting to see:
- Tax Cuts. Companies that operate in the clean energy space are likely to enjoy a reduced tax burden.
- Research Grants. Moreover, companies like GEVO may soon have access to massive amounts of funding by way of government grant as President Biden and the democrat party work to solve the carbon emission issue.
- Increased Demand. Finally, tax cuts aren’t likely to be just for the companies that operate in clean energy, these cuts will likely trickle down to consumers that use clean energy products, leading to increasing demand.
No matter how you slice it, the political climate change is great news for Gevo and its investors.
GEVO Offers a More Realistic Solution to Travel-Related Carbon Emissions
For some time now, electric vehicles have been hitting the road in the United States and around the world. However, there are a few key issues with electric vehicles being the solution in travel:
- Battery Life. Electric vehicles must be charged, and most can only go 250 to 350 miles on a charge. The problem is that charging takes quite a bit of time, unlike fueling up, which happens in minutes.
- Consumer Ability to Shift. For many, new vehicles are expensive. That’s why there’s a robust used vehicle market in the United States. Those who simply can’t afford to purchase new vehicles will have to wait years for used electric vehicles to come into their price range, making it very difficult to cause a widespread shift to EVs.
- Charging Time. Not only do electric vehicles need to be charged, the process often takes hours. What happens when you’re at the grocery store and suddenly realize you need to charge up? Are you willing to spend three or four hours waiting in the parking lot or moseying around the store? I wouldn’t be!
- Long Distance Travel. I go to see my mom who lives about eight hours away quite often. If I had to charge my vehicle two or three times during this trip, it would take me days, rather than hours to see momma… nope, not willing to make that change!
GEVO provides the solution to all of these issues. Their fuels can be, and have been, used in traditional combustion engines. As a result, should the company mass produce an on-road gasoline, it will likely be met with incredibly high demand as the world works to phase out the burning of fossil fuel. Just like any other fuel, it only takes minutes to fuel up, and consumers won’t have to buy expensive new cars to go green.
Not to mention, the company is already tackling the aviation fuel space, a space where electric vehicles simply couldn’t provide the answer, at least, not at this stage in the technology.
Recent Developments Make the Stock More Exciting
Gevo’s fuels, and process have been the center of attention as of late, with several announcements showing that the demand for the company’s fuels will only continue to climb. Some of the most interesting recent developments out of GEVO include:
- HCS Group Partnership. Gevo recently announced that it has entered into an agreement with HCS Group that will bring clean, renewable aviation fuels to Europe using the company’s technology.
- Scandanavian Airlines System Expands Agreement. Also, Scandanavian Airlines System recently expanded its agreement with GEVO, agreeing to purchase five million gallons of renewable aviation fuel per year.
- Net Zero 1. Finally, GEVO recently announced that it will be breaking ground on its Net Zero 1 facility. Not only will this facility expand production, it will have zero carbon footprint, meaning that not only will the fuel be clean, but the process by which the fuel is manufactured will be clean.
These announcements were made over the past month, let alone all the positive news we’ve seen out of the company before. The story here is a simple one, demand is climbing, and given the political climate in the United States and around the world, more demand growth is imminent.
What Analysts Think About GEVO Stock
Analysts seem to love Gevo. While there aren’t many covering the stock, the two that are have overwhelmingly positive opinions of it. Both rate the stock a buy with price targets of $16 and $18.
That puts the median price target on the stock at $17 per share, suggesting the potential for more than 75% gains when compared to Friday’s closing price.
Risks to Consider Before Buying GEVO Stock
If you’re thinking about buying GEVO or any other stock for that matter, it’s important that you consider the risk. After all, there’s no such thing as a risk-free investment. When it comes to GEVO, the most important risks to consider include:
- Speculation. While I believe that GEVO fuels will be met with high levels of demand, the investment is a speculative one. The company is just getting its fuels off the ground and spending massive amounts of money on the expansion of production capacity. Sure, we’re seeing demand growth, but a bet on the stock is a bet that demand will continue to grow and that the company’s work to expand its infrastructure will give it everything it needs to meet that demand.
- Profitability. Due to the massive amounts of money the company is spending on the expansion of its infrastructure, Gevo operates at a loss. While it has hundreds of millions of dollars in the bank, a lack of profitability may lead to dilutive offerings if those funds run dry.
- Volatility. Finally, GEVO stock is known to experience heavy levels of volatility. This makes entrance and exit decisions difficult and could result in significant losses in the short term.
Sure, there are risks to consider, as is the case with any other stock. However, if there’s a clean energy play to look at currently, that play is GEVO. The company’s clean fuels offer solutions to problems that electric vehicles simply can’t solve given the current technology available.
Moreover, Gevo is seeing tremendous demand for its aviation fuels and expanding its manufacturing capabilities to meet that demand. All told, this is a company that’s making big moves, and will likely become a blockbuster in the long run because of it!