Saturday, June 25, 2022

A Pragmatic Look at Gevo, Inc. (NASDAQ:GEVO)

Gevo, Inc. (NASDAQ:GEVO) is a stock trending higher in recent sessions. The buzz around renewable biofuels is only getting louder as Gevo has figured out a way to use a renewable biofuel for commercial airline flights. Shares of GEVO, currently trading at $0.44, could be headed higher as analysts race to put out new price targets for the stock. The current analyst price target $2.30 – already implies a potential move to the upside for GEVO over the next 12 months.

At a current trading price of $0.44, GEVO has a total stock market capitalization of $55.81 million. Over a 52-week period, shares have traded as low as $0.22 and as high as $2.24. However, the $2 mark hasn’t been reached in nearly a year. On Oct. 21, 2015, shares of the company traded at $2.19. But by the beginning of 2016, shares had fallen to a level of $0.65. Which brings us to where we are today – a company that has struggled to break out of a relatively narrow trading range ($0.40 – $0.47).

Gevo, Inc. (NASDAQ:GEVO) fortunes could be changing soon. On Oct. 11, the company announced that it had completed production of the world’s first cellulosic renewable jet fuel for commercial flights. The way it works is the following – the company converts cellulosic sugars from wood waste into renewable isobutanol, which then gets converted into Gevo’s Alcohol-to-Jet (ATJ) fuel. The company has now produced 1,000 gallons of cellulosic ATJ.

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More importantly, GEVO is lining up airline partners to use the fuel. Alaska Airlines is scheduled to fly the first-ever commercial flight powered entirely by the renewable biofuel. In June, Alaska Airlines completed two test flights. The fuel in this case comes from the Pacific Northwest, as forest residuals from the area are converted into sugars, then into isobutanol, then into ATJ.

The isobutanol is the key. It’s a versatile chemical for liquid fuels and for any petroleum-based product. It’s really a platform for creating a broad range of petroleum-based products. Until now, the process of converting isobutanol into airline fuel was too costly and difficult to accomplish on a massive, commercial scale. But GEVO appears to have figured out how to do this.

In addition to Alaska Airlines, the company is also in ongoing talks with Lufthansa Airlines for the commercial supply of renewable jet fuel. That tentative agreement with Lufthansa is for the purchase of 8 million gallons of jet fuel per year over the course of 5 years.  Shareholders are anxious to see if this deal will come to fruition any time soon.

Taking the big picture view, Gevo is all about creating bio-based alternatives to petroleum-based products. The company continues to develop technologies that use a combination of synthetic biology, metabolic engineering, chemistry and chemical engineering to develop isobutanol products, as well as products made from renewable feedstock. The company has two major operating segments – one is the R&D unit of the company, responsible for coming up with new uses for isobutanol; and the other is the Agri-Energy Facility responsible for actual production of ethanol, isobutanol and related products.

GEVO is next set to report earnings on November 3. Analysts and investors will then have a much better idea of how the company sees its future path to profitability. The consensus estimate is for the company to report a loss on revenue of $9.59 million, for an EPS of -$0.09.

But now the company is starting to sign agreements with airline companies, which could clear up any lack of clarity over the company’s profitability potential.

One problem appears to be the cost and complexity of converting wood waste into jet fuel. In the Alaska Airlines example, GEVO has partnered with the Northwest Advanced Renewables Alliance (NARA) to receive cellulosic sugars from wood waste. But that still has to be transported to Missouri, where it’s then converted into isobutanol. From there, it’s transported again, to Texas, where it’s converted into jet fuel.

For now, it looks like GEVO stock could be headed higher in the near term. The consensus price target of $2.30 gives the company plenty of room to run on the upside. This is a exciting story for many traders, and we will keep you up to speed on any new developments. For more news on Gevo, Inc. and other fast-moving penny stocks, please subscribe to now.

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