After a good start to the year, Gevo (GEVO) the stock has shrunk considerably. While you can argue that 55% of stock gains in 2021 are nothing to sneeze at, the stock is down 55% since the February highs. Could the company’s latest announcement be the catalyst to send stocks higher again?
On Monday, the renewable fuel startup revealed it had signed a memorandum of understanding with Archer Daniels Midland; ADM’s drying plants in Columbus, Nebraska, Iowa and Illinois will process approximately 900 million gallons of ethanol produced at the facilities that will be converted into nearly 500 million gallons of sustainable aviation fuel (SAF) and other green products.
If the companies reach a definitive deal as planned, and once the commercialization plans take shape, Gevo could potentially begin production of SAF with ADM by 2025-2026.
The latest news follows a recent strategic alliance formed with Axens, which aims to accelerate the commercialization of sustainable ethanol jet (ETJ) projects.
Gevo’s Net Zero concept targets the production of liquid hydrocarbons using renewable energy sources such as wind, renewable natural gas and biogas, so that when used in engines, these do not ’emit no net greenhouse gas emissions.
“The potential of renewable fuels remains very high and the addition of strong partners is a game-changer, âsaid the Noble analyst. Poe fratt. âRecent initiatives to form alliances with ADM and Axens complement the additions of Chevron as a client and co-investor and of Kiewit as a FEED engineer. Each partner improves the credit profile and the credibility of the Net Zero concept.
In addition to the wave of partnerships, the recent capital increases of the company have created a âfinancing fairwayâ in 2H2022 and all reinforce the âgreen fuels development planâ.
Although Fratt expects some âprofit takingâ following the strong performance of the stock at the start of the year, the analyst has been âvery surprisedâ by the poor performance since the announcement of Chevron LOI (letter of intention) of September 9.
As such, the 5-star analyst remains “positive on the high risk / high return profile of the stock,” reflected by a price target of $ 16 which implies a hike of around 142% year on year. No need to add, Fratt’s rating remains an outperformance (ie, buy). (To look at Fratt’s background, Click here)
Although Gevo currently only has two other analysts to monitor its progress, they are both equally confident, with their positive reviews translating into the stock’s strong buy consensus rating. In addition, the average price target is only slightly less bullish than Fratt’s; at $ 14.67, stocks are expected to add 115% muscle over the coming year. (See the analysis of Gevo shares on TipRanks)
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