Moreover, it marks the fourth straight quarter where results came in below analyst estimates. Nevertheless, the biofuel manufacturer wrapped up the quarter with multiple strategic deals. Interest in sustainable aviation fuel and other hydrocarbon fuels is increasing, solidifying GEVO stock’s long-term case.
Renewable energy stocks such as Gevo have hit a purple patch of late. GEVO stock generated returns of over 550% in the past 12 months. ESG stocks have been on fire since the beginning of the year as investors look to green their portfolios. Moreover, the government’s commitment towards sustainability has been a major catalyst as well.
With the company being a start-up, most of its gains aren’t covered by earnings yet. However, with several deals signed of late and its renewable gas project expected to become operational by 2022, GEVO stock looks like an exciting long-term prospect.
Gevo has been on a deal spree in the past few months, which exhibits the growing interest in its business. Most recently, in October, it signed with food processing giant Archer-Daniels-Midland (NYSE:ADM) to support sustainable aviation fuel production activities. Apart from its ADM deal, it has signed multiple agreements since September.
Gevo signed with Axens North America to commercialize its ethanol-to-jet technology. Axens brings forth its unique technologies, patents and proprietary equipment, which will help Gevo achieve its targets. Additionally, Gevo will be working with Kiewit Energy Group in building its Net-Zero 1 Project.
Furthermore, Gevo was awarded with a massive patent from the U.S. Patent and Trademark Office. With the patent, Gevo will look to diversify and expand the ethanol production needed to meet the rising demand for sustainable aviation fuel. Moreover, Gevo has also signed with oil giant Chevron (NYSE:CVX) in producing inedible corn needed for sustainable aviation fuel production.
According to Gevo’s CEO Patrick Gruber, “The interest in SAF has definitely increased, especially since the White House meeting a couple of months ago.” He states that the customer pipeline has been increasing aggressively, and “The pipeline of potential contracts is now well over a billion gallons per year.”
With GEVO stock’s impressive run-up since the start of the year, several investors have become concerned over its price. It boasts a market capitalization of over $1.5 billion, growing significantly in the past six months.
Gevo is still in its early development stage, but the implication of its technology is highly promising. Development work on its Net-Zero project is on track, and its front-end engineering design should be wrapped up by December this year. Moreover, its RNG project is become operational by early 2022.
In terms of its cash equivalents, the company has had $522.4 million in its cash until the conclusion of the third quarter. This amount is likely enough to finance its projects and initial site research for its Net Zero 2 and 3 endeavors. According to Gevo’s management, the company’s intellectual property is worth more than $400 million.
GEVO stock currently trades between $6 to $7, which is highly attractive. However, if the stock rises over $11 or $12, you might want to reconsider your position.
The Bottom Line on GEVO Stock
Gevo is a highly promising investment that is capitalizing on the tailwinds in the renewable energy sector. Its recent deals suggest strong demand for its product and that it would establish its position as a leading player in the biofuel sector.
Its current price is justified based on its remarkable pipeline and advantageous macro-economic environment.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.