By my estimation, risk-to-reward on a short trade right at this strong historical support level would equate to a maximum profit of only 9% (down to PPS of 0.70) versus minimum loss short term of 30% (up to a PPS of 1.00). And that is based on only mildly good news forthcoming. If the shorts are too stubborn to cover at the point where one of the two catalysts happen (ODS versus partner agreement announced), whenever the second catalysts happens they will potentially be down -75% when PPS shoots to 1.35. Extremely poor risk-reward.
Caution here...NVIV's HUD approval is good. However, there is stilla long path with many obstacles along the way. According to the 10K, "Before clinical trials can commence, an Investigational Device Exemption application ("IDE") must be submitted to the FDA, and the FDA must approve the IDE. The FDA provided comments to our IDE filing and in February 2013, we submitted to the FDA a supplement to the IDE filing. ... We anticipate that our IDE will be approved by the FDA during 2013, but can give no assurance that the IDE will be approved."
So there will probably be additional FDA comments and challenges to the IDE and/or the clinical trials design. In addition, the 10K estimates the timeframe as, "The completion of the human clinical studies and obtaining the FDA approval of a PMA could take between three to five years depending on a number of factors including the FDA review and approval process for the IDE and the clinical trial designs, the amount of time it will take to enroll and treat patients in the studies, and the FDA review and approval process for the PMA."
While API makes noise about RFS, the oil industry has invested in renewable fuels: Valero owns several ethanol plants and it is building a renewable diesel facility, Flit Hills owns several ethanol and biodiesel plants, United Refining has acquired a biodiesel facility, Holly-Frontier has partnered in a biodiesel facility.
Three scenarios - $8.50 to $10 if the market is in a pullback at that moment in December 2013.
$10.50 to $11 middle scenario if the market is doing OK and either soybean crops are average or conversion to other feedstocks is successful. $11.50 to $13 if the market is doing well and feedstock production does well and expansions of capacity have come on-line as planned.
Earnings Call Presentation - EBITDA - $5 to $15 Q1, $15-$25 Q2, said Q3 probably even higher.
The mean projection means $10M Q1 + $20M Q2 + likely $25M Q3 = $55M out of 34M sharecount
Or an EBITDA roughly $ 1.62 per share.
Recall Blender TAX CREDIT is a TAX CREDIT, so a TAX CREDIT CANNOT BE PART OF Earnings Before INCOME TAXES, Depreciation, and Amortization.
So the Tax credit will be further icing on the cake:
With OVER 220M gallons projected for 2012 (assuming a VERY modest 40M gal increase vs. 2012), and assuming REGI once again realizes about 33% of the gallons sold as a tax credit,
THAT IS ENOUGH TAX CREDIT (1/3 of 220 = $73M total credit) TO COMPLETELY OFFSET ANY PROFITS FROM EARINGS that come out of EBITDA