Gevo Inc (NASDAQ: GEVO) has had an incredibly strong start to 2021 year, gaining more than 266% so far. With such dramatic gains, many are wondering whether or not the stock will be able to continue its run for the top.
In my view, the gains are far from over. Here’s why:
Skip to What You Want to Read
- Why Gevo Stock is Up So Much This Year
- Why the Gains Will Likely Continue
- What Analysts Think About GEVO Stock
- Risks to Consider Before Buying GEVO Stock
- Final Thoughts
Why Gevo Stock is Up So Much This Year
As mentioned above, Gevo has been running for the top so far this year. The stock is up well over 250%, and while some profit taking has taken place at the top, many believe that the gains are just the beginning, myself included.
So, why is GEVO up more than 250% and how does it have room for gains ahead?
We’ll talk about the gains ahead in a second. Nonetheless, the reason Gevo stock is up so big this year is relatively simple. Keep in mind, Joe Biden is the President of the United States, a factor that’s playing a major role in the growth in the stock.
You see, President Biden has been clear about the fact that he plans on pushing for clean energy, and that’s just what GEVO is all about. Over the past several years, the company has developed and perfected a way to turn renewable feedstock, like wood, waste food, and other feedstock into clean-burning, renewable fuels.
With President Biden in the White House and complete democrat party control in Congress and the Senate, the push to clean energy is likely to happen relatively quickly, which bodes well for GEVO and its investors.
Afterall, the Biden Administration and his cohorts in Congress and the Senate are likely to move forward with grants and tax breaks for companies in the clean energy space. Moreover, further tax breaks are likely for consumers that take advantage of clean energy products.
As a result, GEVO is likely to benefit from tax breaks, grant funding, and increased demand for its clean-burning, renewable fuels. That’s exciting news and it’s likely the news that has caused the tremendous gains in the value of the stock thus far in 2021.
Why the Gains Will Likely Continue
With such strong gains, many are wondering if Gevo has any more room to climb or if the stock is going to fall from here. In my opinion, there’s plenty more room for gains.
Well, it all starts with what GEVO has done so far this year. Aside from the political support the stock has garnered, the company has announced that it will be moving forward with the development of its first net zero production facility, known as Net Zero 1.
At this facility, Gevo will produce its clean, renewable fuels, in a clean, renewable way. In fact, the name of the facility, Net Zero 1, explains quite a bit. Net zero means that at the end of the day, the facility will not add any carbon to the global carbon footprint. Any emissions created by the facility, will be offset, bringing the facility to a net-zero greenhouse emission standing.
This is all part of the company’s plans to greatly expand its production capacity, and for good reason.
With President Biden in office and the democrat party in control over Congress and the Senate, there’s a strong chance that demand for Gevo’s clean fuels will climb. Seeing this potential, GEVO is greatly expanding production in order to meet this demand.
Over the next several months, we’re likely to hear more updates out of GEVO, as the company becomes a cornerstone in the transportation industry.
Now, I know that there are naysayers that suggest electric vehicles are the answer to greenhouse gas emissions in transportation. While this may be the case decades down the line, I don’t see it any time soon.
The fact of the matter is that electric vehicles only account for about 2% of vehicles sold in the United States, and for good reason. These vehicles are expensive, and have a relatively short range. For example, if you plan on driving more than a couple hundred miles, you will have to find a charging station and wait for several hours once your battery runs dead.
However, Gevo fuels can be used in traditional engines. As such, when the fuel runs out, consumers simply need to find a gas station, and fill up, keeping up with the traditional feel of transportation as it is today.
While electric vehicles have an uphill battle in terms of adoption, GEVO should have no issues getting consumers to adopt their fuels, making these fuels the more likely long-term answer to the high-emissions generated in the transportation industry.
What Analysts Think About GEVO Stock
I’m not the only expert that sees opportunity when I see GEVO stock, analysts seem to love the stock as well. In fact, there are two analysts currently covering the stock, both of which have rated it a Buy.
Price targets on GEVO stock range from $5 to $16, with a median of $10.50. However, these price targets are largely outdated, and once the analysts review the stock for an update, I’m expecting that these targets will increase in a big way.
Risks to Consider Before Buying GEVO Stock
Whether you’re interested in investing in Gevo, another stock, or another asset class entirely, any investment you make will come with risk. When it comes to GEVO, the most significant risks to consider include:
- Speculation. GEVO is carving out a new subset of an industry. Any time you invest in something new, you’re making a speculative bet. In the case of GEVO, that speculative bet is that the political environment sets the stage for clean-energy legislation. When this happens, you’re betting that consumers will adopt the clean fuels products created by Gevo. Should this not be the case, the stock could experience dramatic declines.
- Profitability. GEVO is trading with a large-cap valuation, but that doesn’t mean the company’s profitable. At the moment, the company is spending all its money, and then some, on the expansion of its infrastructure. While these investments have the potential to pay dividends in the future, the lack of profitability is concerning to some investors, just like the lack of profitability in Amazon.com as it expanded its infrastructure to become the world’s largest e-Commerce company.
All in all, I believe that Gevo stock represents an exciting opportunity. Sure, it’s a speculative bet on a company that hasn’t achieved profitability. However, as the company continues to expand its infrastructure, I believe that we’ll see dramatic growth.
Moreover, this growth is likely to be exacerbated by the change in political tides. All told, the 266%+ gains seen so far this year may prove to be nothing more than a drop in the bucket to what’s to come.