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After a strong start to the year, Gevo (GEVO) stock has retreated considerably. While you could argue that 55% of share gains in 2021 is nothing to be sniffed at, the stock is down by 55% since February highs. Could the company’s latest announcement be the catalyst to send shares higher again?
On Monday, the renewable fuel start-up disclosed it had signed a memorandum of understanding (MoU) with Archer Daniels Midland; ADM’sdry mills in Columbus, Nebraska, Iowa, and Illinois will process about 900 million gallons of ethanol produced at the facilities which will be converted to almost 500 million gallons of sustainable aviation fuel (SAF) and other green products.
Should the companies enter into a definitive agreement as expected, and once the commercialization plans take shape, Gevo could potentially begin SAF production with ADM by 2025-2026.
The latest news follows on from a recent strategic alliance formed with Axens, which is aimed toward speeding up the commercialization of sustainable ethanol-to-jet (ETJ) projects.
Gevo’s Net Zero concept targets the production of liquid hydrocarbons with the use of renewable sources of energy such as wind, renewable natural gas and biogas so that when used in engines these emit net zero greenhouse gas emissions.
“The potential for renewable fuels remains very high and adding strong partners are game changing events,” said Noble analyst Poe Fratt. “The recent moves to form alliances with ADM and Axens complement the additions of Chevron as a customer and co-investor and Kiewit as the FEED engineer. Each partner enhances the credit profile and credibility of the Net Zero concept.”
In addition to the flurry of partnerships, the company’s recent capital raises have created a “funding fairway” into 2H2022 and all bolster the “green fuel development plan.”
Although Fratt expected some “profit taking” following the stock’s strong performance at the start of the year, the analyst has been “very surprised” by the lackluster performance since the September 9 Chevron LOI (letter of intent) announcement.
As such, the 5-star analyst remains “positive on the stock’s high risk/high reward profile,” reflected in a $16 price target which implies one-year upside of ~142%. No need to add, Fratt’s rating stays an Outperform (i.e., Buy). (To watch Fratt’s track record, click here)
While Gevo currently has only two other analysts tracking its progress, they are both just as confident, their positive assessments resulting in the stock’s Strong Buy consensus rating. What’s more, the average price target is only slightly less bullish than Fratt’s; at $14.67, shares are projected to add 115% of muscle in the year ahead. (See Gevo stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.