Gevo (GEVO), a pioneering developer of net-zero hydrocarbon fuels and chemicals, recently secured a promising $1.46 billion loan guarantee from the U.S. Department of Energy for its groundbreaking Net-Zero 1 project in South Dakota. The venture targets the production of sustainable aviation fuel, protein and animal feed products, and corn oil, all with a net-zero carbon footprint. The news has helped drive the stock up over 100% in the past month.
This positive momentum, second-quarter financial results that exceeded expectations, and innovative acquisitions and developments all underline its standing as a potentially attractive investment option in the renewable energy industry.
Gevo’s Expanding Energy Empire
Gevo is a dedicated carbon abatement firm that thrives on transforming renewable energy into energy-dense liquid hydrocarbons that can be applied as renewable fuels. With its three-pronged operational segments (Gevo, Agri-Energy, and Renewable Natural Gas), the company provides a range of products, including renewable gasoline, diesel, isobutanol, sustainable aviation fuel, and renewable natural gas.
The company has secured a conditional commitment for a loan guarantee from the U.S. Department of Energy, amassing a borrowing capacity of $1.63 billion. This financial backing will primarily fund Gevo’s large-scale Net-Zero 1 project in South Dakota, a facility designed to manufacture around 60 million gallons of sustainable aviation fuel annually. The project is expected to significantly contribute to domestic energy security, accelerate the adoption of climate-smart agricultural practices, and boost the rural economy.
In addition, Gevo has made strategic acquisitions and received patents, further strengthening its position in the renewable fuel and chemical production industry. The company recently acquired Cultivate Agricultural Intelligence for $6 million, which will be integrated into its wholly-owned Verity subsidiary. This move aims to provide data-driven solutions for carbon abatement across diverse industries.
Further, Gevo was granted a patent for its ethanol-to-olefins process, which is expected to reduce the cost of biofuels and biochemicals. The company has also announced its decision to acquire Red Trail Energy’s ethanol production plant and carbon capture and sequestration assets for $210 million, a move in line with its commitment to fostering a net-zero future.
Analysis of Gevo’s Recent Financial Results
The company recently reported its Q2 2024 financial results. Revenue was $5.26 million, beating expectations of $4.25 million. Revenue from its RNG (Renewable Natural Gas) business was $4.3 million, constituted by RNG sales of 95,187 MMBtu for $0.1 million and $4.2 million from sales of environmental attributes. The company also secured an essential milestone under its joint venture with LG Chem in April 2024, which added another $0.8 million.
However, during Q2, Gevo saw a loss from operations of $24 million and a non-GAAP adjusted EBITDA loss of $15.3 million. The GAAP loss from the operations of its RNG subsidiary stood at $1.3 million and non-GAAP adjusted EBITDA of $0.9 million. This resulted in earnings per share (EPS) of -$0.09, which fell short of analysts’ estimates by $0.01.
At the quarter’s end, Gevo held cash, cash equivalents, and restricted cash amounting to $315.3 million.
What Is the Price Target for GEVO Stock?
The stock has been on a volatile (beta of 2.64) upward trend, climbing over 195% in the past year. It trades at the high end of its 52-week price range of $0.48 – $2.28 and demonstrates positive price momentum by trading above the 20-day (1.81) and 50-day (1.38) moving averages. The P/B ratio of 1.4x suggests the company is trading at a discount to peers in the Specialty Chemicals industry, where the average P/B ratio sits at 3.25x.
The company is thinly followed by Wall Street. However, the most recent analyst recommendation was bullish on the stock. Gevo is rated a Moderate Buy overall, with a price target for GEVO stock of $14.00, representing a potential upside of 347.28% from current levels.
Final Thoughts on Gevo
Gevo has emerged as a strong contender in the renewable energy industry with its recently secured loan guarantee from the U.S. Department of Energy. Gevo’s stock price has soared despite a turbulent market, reflecting investors’ confidence in the company’s future. The firm’s strategic acquisitions and groundbreaking patents suggest a promising upside for the firm’s sustainable, net-zero future. Overall, GEVO appears to be an attractive option for investors seeking to capitalize on opportunities within the renewable energy sector.
