Gevo (NASDAQ:GEVO) stock still hasn’t bounced back after its sharp decline last spring. That’s not to say it didn’t try to do so. Shares in the renewable fuels company saw a partial recovery in late May and early June. As I discussed at the time, updates with its Net Zero Projects convinced investors to bid it back up partially, from around $5 per share, up to about $9 per share.
Unfortunately, this rally didn’t last long. The stock drifted back toward prior levels through the summer. Yet since September, a slew of new developments has convinced investors to dive back into it.
First, news of a partnership with a major oil company to produce sustainable jet fuel was published. This big ticket partnership came not long after a deal Gevo inked in August with another big oil company to sell it renewable natural gas. Second, there was news of it being granted a patent for its process to make renewable diesel and jet fuel products.
With these developments, shares have seen a boost in price. Although in recent weeks, it’s struggled to move above $6-$7 per share. Nevertheless, with further progress just around the corner, and big potential down the road, there’s still a path for shares to make their way back to price levels seen earlier this year.
Why GEVO Stock Can Rebound After Its Massive Decline
A little over a year ago, Gevo was literally a penny stock, as in it traded for around $1 per share. But between October 2020 and February 2021, it went on an incredible run. At its peak, it hit prices of $15.57 per share, or around a 15x gain in a matter of months.
Why did GEVO stock perform so well late last year, and early next year? It was a two-step process. First, now-President Joe Biden’s electoral victory last November. With Biden vowing to accelerate America’s shift to clean energy, investors became very bullish about the sector. But with so many higher-profile names already up big, they started to run-up more under-the-radar plays. In turn, stumbling on this name, they realized GEVO stock was one of the better “green wave” opportunities, hiding in plain sight. What do I mean when I say “hiding in plain sight?”
Back in August 2020, before candidate Biden became President Biden, this company entered what I’ve referred to as a “high octane deal” with commodities giant Trafigura. Yes, the deal doesn’t commence until 2023. But per the terms of it, Trafigura will purchase 25 million gallons of renewable hydrocarbons per year from Gevo.
Considering that, despite this multi-billion dollar deal, shares were still trading at a price that valued the whole company at just a few hundred million dollars. Not surprisingly, investors aggressively bid it up. In hindsight, things got a bit out of hand. The company’s true “payoff” moment is still years away. However, with these past developments, plus the more recent ones discussed above? There may be a clear path for this stock (at $6.57 per share today) to kick off its recovery.
Upcoming Commercialization Progress Will Send It Higher
After these latest material developments, you may think GEVO stock will need another breather, and hold steady. In the immediate term, this may be true. But a few months down the road? Further commercial progress could move it to higher prices.
For instance, consider the company’s Net Zero Projects. The first phase of this (Net-Zero 1) remains a work-in-progress. Yet, if it can stick to its established timeline and complete front-end engineering work by year’s end, investors will be more confident that the company’s previously laid out plans will become reality.
Related to this, is the prospect of it making more renewable hydrocarbon supply deals. As Stifel analyst Derrick Whitfield noted in his research note on the stock back in August, there is an “impressive demand pipeline” for the products to be produced by the Net Zero projects.
Not only that, Whitfield is impressed with the company’s advantages when it comes to producing sustainable jet fuel. With both factors on its side, it makes sense why he gave Gevo a “buy” rating, and a $10 per share price target. In fact, it may only take a few more developments, like a partnership deal or two, for shares to hit that price level.
The Verdict on GEVO Stock
With a market capitalization of $1.31 billion, a lot of the upside from Gevo’s projects is already baked into its stock price. This means big downside risk if further developments fall short of expectations. But as I’ve noted before, with both the cash to build out its operations and the demand in place to turn its big plans into big profits, prospects remain bright.
Rated a “B” in Portfolio Grader, GEVO stock is risky, but has high-potential. It’s one of the better “green wave” opportunities currently out there for investors.
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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