Gevo Inc (NASDAQ: GEVO) is headed for the top yet again. After a recent dip in value following more than 100% gains in January, investors are back at it, showing their support for the clean energy play as the political environment changes.
So, what’s the deal? Why are so many investors jumping into GEVO stock?
The answer is relatively simple. Years of work at Gevo have brought it to today. The company is working to expand as political changes suggest demand for their product will begin to fly high. Here’s what’s going on:
Skip to What You Want to Read
- What Is Gevo
- Why Investors Are Excited About GEVO
- How Big Is the Opportunity Here?
- What Analysts Think About GEVO Stock
- Risks to Consider Before Buying GEVO Stock
- Final Thoughts
What Is Gevo
Gevo is a clean energy company tackling one of the biggest areas of pollution as we know it today, transportation. However, the company isn’t interested in making electric vehicles or the batteries that run them. Instead, Gevo is focused on making traditional vehicles more environmentally friendly, not by changing them, but by changing what they run on.
Today’s transportation market is centered around oil. Fossil fuels provide the combustion that leads makes vehicles move.
However, the production and burning of fossil fuels is horrible for the global environment. Scientists have been pointing to these issues for years, and now politicians are starting to step in.
So, what’s GEVO doing to solve the problem?
For several years, the company has been working to perfect a clean-burning, renewable fuel source. Through a proprietary process, the company converts renewable feedstock into isobutanol, a powerful fuel that can then be refined into jet fuel, gasoline, and other fuels.
So, instead of choosing to drive electric vehicles that have a very limited range and long charge time, consumers will be able to drive their traditional vehicles and know they’re doing good things for their planet. That’s a huge win given the current market climate.
Why Investors Are Excited About GEVO
Gevo is at a pivotal point, and there couldn’t be a better time for it. The company has perfected its process and its fuels. Now, it’s time to ramp up production.
In fact, GEVO has already announced plans to develop its Net Zero 1 production facility, where it will be able to produce its clean fuels with zero carbon footprint. Not only does the company have the plans to develop the facility, it has the means to do it, with hundreds of millions of dollars in the bank.
This couldn’t come at a better time.
Joe Biden won the 2020 presidential election and is now the President of the United States. Moreover, Congress and the Senate are now controlled by the democrat party. That’s a major change in guard and a major win for GEVO and its investors.
Over the past several years, Joe Biden and the democrat party have been raising the alarm bells about climate change and changes we need to make as a country and civilization to reverse the issue.
As a result, we can expect to see tax cuts, grants, and increasing demand surrounding clean energy products and clean energy research. The news couldn’t be better for Gevo.
All in all, there’s never been a better time to be excited about what the company’s doing.
How Big Is the Opportunity Here?
Fuel is a massive market. In the United States alone, $116 billion was spent on gasoline in the year 2019. That doesn’t count diesel fuel, jet fuel, or any other fuels.
While I’m not expecting that Gevo’s fuels will be the only fuels on the market any time soon, taking just two or three percent of this market would be massive for the company, and that’s a very achievable goal over the next few years.
All in all, we’re talking about an opportunity to invest in a company that has a real possibility of generating billions of dollars in annual revenue over the next three to five years. That’s a massive opportunity.
What Analysts Think About GEVO Stock
There’s not many analysts covering GEVO stock at the moment, but those that do cover it, love it. At the moment, only two analysts have weighed in on the stock, both of whom rate it a buy.
Moreover, price targets are $5 and $16. However, it’s important to keep in mind that the $5 price target is outdated by months and doesn’t take into account recent funding, nor the likelihood of the Net Zero 1 production facility coming to fruiting any time soon.
As such, I’m expecting, not only for more analysts to jump on Gevo, but for those that are covering GEVO to increase their price targets relatively soon.
Risks to Consider Before Buying GEVO Stock
There’s no such thing as an investment without risk, and I’m not here to tell you that GEVO is the exception to that rule. The fact of the matter is that there are always risks to consider. When it comes to GEVO, some of the most significant risks include:
- Profitability. Gevo generates revenue, but in early stages, that revenue is minimal. It’s definitely not enough to cover the expenses associated with expanding infrastructure to meet coming demand. As a result, the company operates at a loss.
- Speculation. A bet on GEVO is a bet that the clean energy movement will continue to gain steam and that consumer demand for clean alternatives to traditional fuels will be high. There’s no guarantee this will be the case, adding to the level of risk associated with investing in the stock.
- Volatility. While GEVO isn’t a penny stock, it experiences volatility at levels that are comparable to penny stocks. High levels of volatility make entrance and exit decisions difficult. Moreover, high volatility means that there’s potential for significant declines over a short period of time.
Sure, there’s risk to consider before investing in GEVO stock. However, I believe that those risks are far outweighed by the potential offered by the company. With its stronghold on clean fuels and a change in guard in Washington D.C. that suggests legislative changes pushing for clean energy growth, it only makes sense that GEVO stock has incredible potential ahead.