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Colorado-based Gevo Inc (NASDAQ:GEVO) is a company that specializes in the production of renewable, sustainable fuels. GEVO stock has actually been around for many years, but biofuels have been a tough sell and it was rough going for a while.
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A little over a year ago, GEVO was a penny stock. 2021 has been a breakout year for Gevo, but it’s also been tumultuous. Its closing price has ranged from $4.33 at the start of the year to a high of $14.61 in mid-February.
After a week-long slump, GEVO is currently priced at $6.10, and that has some investors smelling opportunity. But should you be considering these shares for your own portfolio?
Biofuels like those produced by Gevo have a bullseye on them. Ultimately, the goal is to phase them out. But there is a sweet spot, which could last for decades, where renewables can play a critical role.
Transportation fleets can’t be electrified overnight, and carbon-neutral renewable gasoline and diesel fuel from Gevo can fill the gap. That puts GEVO stock in a strong long-term growth position. The biggest boost of all may come from the company’s increased push into renewable aviation fuel.
The Big Promise of Bio Jet Fuel
I want to focus on one area of Gevo’s business that has extreme growth potential. The company has been making news lately with announcements about deals to produce large quantities of sustainable aviation fuel.
Airlines are ramping up after a year of flights decimated by the pandemic. At the same time, the industry is facing growing pressure over carbon emissions.
Electrification or hybridization is costly, but it’s at least available for most ground transportation. The same options are not yet commercially available for airplanes. University of Alberta bioresource technology professor David Bressler explains the challenge:
“The aviation space is about two per cent of our carbon footprint out there, and it really has nothing in the short term that can help them reduce their carbon footprint.”
The sustainable jet fuel produced by Gevo is a a key solution, and it’s available now. It can be blended with traditional jet fuel up to 50% with no conversion or upgrades required to existing engines.
According to Gevo’s estimates, goals set by the U.S. and E.U. to reduce the carbon intensity of airplane flights would support production of up to 45 billion gallons of sustainable aviation fuel annually by 2050.
The needs of the airline industry alone have the potential to drive GEVO stock growth for years to come.
GEVO Stock Saw a Short-Lived Run in Early 2021
One thing that might give potential investors pause is GEVO’s performance to kick off 2021. As optimism grew over a President Joe Biden White House and its implications for the biofuel industry, GEVO stock was on fire.
It began to gain momentum last December, then took off through January. By the time it closed at $14.61 on Feb. 16, it had posted growth of 207% so far in 2021.
But then the bottom fell out. Amid concerns about low revenue, falling oil prices and share offerings, GEVO stock went into a prolonged slump. It bottomed out at $4.76 in May.
Having witnessed what happened to Gevo shares during that period, it’s not surprising that some investors might be gun shy today.
The Bottom Line on GEVO Stock
Recent events have spurred interest in GEVO stock, and the general mood is optimistic. For example, just a month ago none of the analysts polled by the Wall Street Journal had rating for Gevo. Now there are three, and they are unanimous with their “buy” rating.
Their average 12-month price target is $15.67, which represents a whopping 156% upside. That price target would also top GEVO stock’s $14.61 close in February.
After slumping 15% over the past week, can Gevo shares regain their mojo and rally? More importantly for someone with a portfolio that’s focused on long-term growth, will its biofuel strategy pay off with sustained revenue growth and eventual profitability?
Nothing is a certainty for this Portfolio Grader “B” rated company. And frankly, Gevo’s performance had not been impressive for years — there’s a reason GEVO was a penny stock as recently as last October.
However, we are entering a new era of net-zero carbon emissions, and that changes the game dramatically. Gevo’s push to expand production of sustainable aviation fuel meshes well with that industry’s pressure to reduce its carbon footprint. That’s got analysts excited. At its current price, GEVO stock may well prove to be a worthwhile investment.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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