GEVO Stock: This Isn’t Even the Tip of the Iceburg

Gevo Inc (NASDAQ: GEVO) is having a strong start to the trading session in the premarket hours this morning, following up on the strong gains seen out of the stock yesterday. While there’s been no news out of the company, whether by SEC filing or press release, there really doesn’t need to be to generate excitement at the moment. 

Here’s what’s going on:

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Here’s Why Investors Are Excited About GEVO

Whether or not Gevo released news is null at the moment. The fact of the matter is that investors are excited about clean energy. You see, not only will democrat candidate Joe Biden be the next President of the United States, he will be joined in Washington D.C. by a democrat-majority congress and a democrat-majority senate. 

Regardless of what side of the aisle you stand on, it’s important to understand what that means for the market, for energy, and for the economy. Those three topics could fill a book, so today, we’ll focus on energy and what it means for GEVO stock. 

Over the past several years, Joe Biden and his colleagues have been outspoken about their views toward environmental change and the idea that the human population is to blame. They’ve pointed to the burning of fossil fuels as the catalyst that’s driving global warming and have been clear about their views that something has to change in order to solve the problem. 

What does that have to do with GEVO? EVERYTHING!

For those of you who haven’t been following the stock, Gevo’s claim to fame is its technology that allows it to turn waste feedstocks into usable, renewable, clean-burning fuel. That’s key considering the incoming Presidential Administration, Congress, and Senate. 

The democrats are looking to combat environmental change due to the burning of fossil fuels. Keep in mind that nearly 30% of all greenhouse gasses released into the world are the result of transportation emissions. Airplanes, cars, trucks, busses, boats, any mode of transportation that uses fuel. 

That’s where GEVO comes in. The company manufactures clean, renewable fuels from jet fuels to those designed for off road vehicles. Not to mention, the company is likely working its way to regulatory approval of a clean competitor to on-road vehicle gasoline. 

The Real Fun Hasn’t Even Started Yet

While GEVO stock has been on a tear as of late, it’s my belief that the real fun surrounding the stock hasn’t even started yet. The fact of the matter is that in the world we’re likely to step into in the future, clean energy is going to be a major play. 

Think about it, Gevo has been working for years to develop the technology it has today. In fact, I first found the company a few years back when it announced that its fuels would be used in their first commercial flight. 

Of course, that flight went well, opening the door to the more widespread use of the clean fuel in the airline industry. 

Nonetheless, airlines are only a small piece of transportation. Keep in mind, GEVO has developed fuels for off-road vehicles as well. Moreover, I expect that the company will push to have these fuels approved for on-road vehicles as well. 

With the democrats leading Washington D.C., it shouldn’t be difficult to gain this approval. 

At the same time, GEVO is also ramping up production in a big way. It seems as though Pat Grubber and his colleagues are clearly seeing the potential I’m talking about. 

The bottom line is that up to now, we’ve been in the midst of a large-scale pilot test. Pretty soon, with the democrat party leading the charge, that pilot test is likely to go mainstream. 

How Democrat Leadership Will Change the Shape of Energy

I’ve talked a lot about how democrat leadership will be good for Gevo. We know that with democrats in office, it will be easier for the company to push for its fuels to be used in on-road applications. 

But that’s not the only way democrat leadership will change the shape of energy and transportation. 

The fact is that there is likely to be quite a bit of money thrown around to improve the environmental impact the United States and its allies have on the planet we call home. Some of the most important legislative changes that I’m expecting to see in the year, or couple years, ahead include:

  • Massive Grants. When the United States government wants something done, it spends money. That’s been the case for some time now. With the democrat party likely pushing for clean energy changes, I’m expecting to see grants given to the companies on the leading edge of innovation in the space. With GEVO being the clean fuels leader, it’s in a strong position to take advantage of these grants. 
  • Tax Cuts. In order to spur continued development and mass availability of clean energy alternatives, clean energy companies, like Gevo, are likely to benefit from tax cuts ahead. 
  • Consumer Tax Perks. Finally, to spur mass adoption, the US government is likely to provide tax cuts or other incentives to consumers to take advantage of clean energy products, serving to increase demand for clean fuels, solar energy, fuel cell technology, and more. 

All of this bodes well for GEVO and its investors. 

What Analysts Think About GEVO Stock

A quick search on TipRanks will show that the analysts that are covering GEVO stock are excited about the future. At present, two analysts cover the stock, both of whom have it rated as a Buy with a $5 price target. 

While the price target represents the potential for declines, it’s important to keep in mind that these targets were provided before we knew that the democrat party would control the House, Congress, and Senate. 

Considering the political climate change, one that will likely lead to major discussions surround environmental climate change, I’m expecting for these price targets to be revised upward relatively soon. 

Risks to Consider Before Buying GEVO Stock

If you’re going to invest, you’re going to need to be willing to accept risk, whether you’re investing in GEVO or a blue chip dividend player. Risk is just part of the game. When it comes to Gevo, the most significant risks to consider include:

  • Speculation. A bet on GEVO stock is a bet that we will see legislative changes and mass adoption of clean energy products. With the democrat party taking over Washington D.C., that’s likely, but not a guarantee. As such, this is a speculative play that will come with increased risk. 
  • Capital. While the company does generate revenue through the sale of its clean energy products, it’s not generating profit as it continues to spend massive amounts of money on the expansion of its infrastructure and manufacturing abilities. Should funds dry up prior to profitability, the company may decide to sell newly issued shares to raise funds, diluting value for existing shareholders and leading to declines. 
  • Adoption Risk. Finally, for Gevo to turn into a smash hit investment, it needs consumer adoption. Even if all the stars line up on Capitol Hill, and legislation is passed that improves the odds for clean energy companies, consumer adoption is a must for success to take place. Should consumers decide not to use the clean fuels, significant declines will be the result.  

Final Thoughts

Let’s make one thing clear right off the bat here. I am a big fan of GEVO. I didn’t write the risk section to scare you off, I did so to give you a fair shake as risks should always be considered prior to making an investment. 

Nonetheless, in my opinion, there’s never been a better time to buy the stock. With legislative changes likely to come down the line, and increased consumer, corporate, and government awareness of global warming, it’s hard to imagine a scenario where any of the risks above actually come into play. All in all, I believe that we’ll see tremendous growth out of GEVO stock moving forward.