Colorado-based Gevo (NASDAQ:GEVO) is a renewables-sector company with a focus on drop-in gasoline and other hydrocarbons with net-zero greenhouse gas emissions. Since green-energy assets have been doing well lately, Gevo stock holders have enjoyed strong returns year-to-date.
Yet, in mid-February there was an interruption in Gevo stock’s uptrend. In fact, the broader clean energy sector seemed to take a dive during this time.
It’s wasn’t necessarily caused by something specific to Gevo, the company. Rather, the share-price dip appears to be the result of the unfortunate cold snap in Texas.
I’ll try to get to the bottom of this and, in the process, offer an assessment of whether GEVO stock holders should sell their shares or consider the price correction an opportunity to buy more.
A Closer Look at GEVO Stock
So, about that price dip — admittedly, it was sharp and sudden. The share price was close to $15 on Feb. 12, only to fall to around $11 on Feb. 18.
As of Feb. 24, the price of GEVO stock is hovering around $11.50.
Yet, this doesn’t mean that the longer-term uptrend has been broken. Let’s not lose sight of the fact that GEVO stock was priced at just $4 and change at the beginning of 2021.
In other words, the bulls are still in control of the general price trend. Another important fact to be aware of is that the company’s five-year monthly beta is 3.24.
This means that GEVO stock has been known to move three times as fast as the overall stock market. Therefore, while it’s appropriate to buy on the dip, it’s advisable to maintain a small position size due to the stock’s volatility.
A Crisis in Texas
It’s reasonable to conclude that GEVO stock’s increase in early 2021 is, in large part, due to President Joe Biden’s avowed support of renewable fuel sources.
Plus, in January, the U.S. Department of Energy’s Office of Fossil Energy announced its plan “to make $160 million in federal funding… available to help recalibrate the US’ vast fossil-fuel and power infrastructure for decarbonized energy and commodity production.”
Hence, it’s understandable that GEVO stock and the renewables sector in general did well in January.
However, in February there was a weather-related electricity crisis in Texas. And, Texas Governor Greg Abbott tried to pin the blame on renewable energy companies.
“Our wind and our solar got shut down and they were collectively more than 10 percent of our power grid,” and “that thrust Texas into a situation where it was lacking power,” Abbott declared.
With this, a controversy and some pushback against the green energy movement commenced. So, does this mean that GEVO stock holders should dump their shares?
An Analyst Hikes His Target
Evidently, at least one prominent analyst isn’t recommending panic-selling the stock.
Specifically, H.C. Wainwright analyst Amit Dayal recently reaffirmed his “buy” rating on GEVO stock. Not only that, but Daval hiked his price target on the stock from $5 to $18.
That’s not just doubling down — that’s tripling down and then some. In support of this, Dayal cited the $350 million cash infusion that Gevo generated from its late-January stock offering.
Dayal further observed that this cash should help Gevo to complete the build-out of the company’s renewable energy project known as Net-Zero 1.
Reportedly, the Net-Zero 1 plant will be able to produce 45 million gallons of gasoline and jet fuel per year. And amazingly, the plant will achieve this with a net-zero greenhouse gas footprint.
The Bottom Line on GEVO Stock
Politicians will continue to play the blame game, but that doesn’t mean investors have to react with panic.
Gevo is continuing to move forward with it ambitious plans, and GEVO stock holders shouldn’t feel the need to dump their shares.
If anything, they might consider accumulating a few more shares. Just be aware that the stock is volatile, and overall, position sizes should remain moderate.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.