This renewable fuel stock is definitely
worth watching in 2022. Today I want to
talk about a stock that has dropped to a
very low price and I think that this
could provide excellent value right now.
Gevo (Nasdaq:GEVO) was traded on the nasdaq under the
ticker gevo.
This company has a proven technology and
agreements in place with some of the
world's largest companies
as well as recently signing the largest
ever renewable fuels contracts worth
billions of dollars.
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This video should not be taken as
financial advice and I encourage
everyone to do your own due diligence
if considering investing in this company
now let's get into it.
Who are Gevo?
Gevo incorporated is a renewable
chemicals and advanced biofuels company.
Focused on sustainability, gevo (NASDAQ:GEVO) addresses
the market need for reducing greenhouse
gas emissions with sustainable
alternatives and is commercializing the
next generation of biofuels with diesel
gasoline and jet fuel that have the
potential to achieve zero carbon
emissions.
Gevo uses low carbon renewable resource
based carbohydrates as raw materials and
is developing renewable electricity and
renewable natural gas for use in
production processes resulting in low
carbon fuels with substantially reduced
carbon intensity and substantially
reduced greenhouse gas emissions
gevo believes that its proven patented
technology enables the use
of a variety of low carbon sustainable
feedstocks to produce price competitive
low carbon products in addition to
addressing
the problems of fuels gevos technology
also enables certain plastics such as
polyester to be made with more
sustainable ingredients
gevo currently operates two main plants
where feedstock is separated into its
components and the starch goes to the
fermentation process to make biofuel
while the protein becomes animal feed
that is fed back to cows which they use
to produce natural gas
gevo produces a range of products such
as jet fuel across a wide range of
markets
including the aviation industry
and the automotive industry providing
gevo with an enormous total adjustable
market of 888 billion gallons per year.
so the big question right now is:
Is GEVO stock a Buy, Sell or hold?
The company intends to ramp up
production over the next several years
and has secured off tech agreements with
major corporations while shares have
been volatile the long-term outlook
remains positive setting up a potential
rebound into 2022
gevo represents a solution to other
segments of transportation like aviation
and shipping
data from gevo suggests its platform is
at the bottom of the cash cost of the
production curve compared to other
emerging sustainable aviation fuel
alternatives this chart shows gevo's
competitive advantage supporting the
bullish case
this chart has been taken from the
company's 2021 investors presentation
which I highly rec which I highly
recommend checking out.
The company's current annual capacity is
only 100,000 gallons but the technology
is already proven to work the effect now
is to expand production with a new
facility that is expected to have
capacity of 46 million gallons of
renewable fuels per year
the new plant falls within Gevo's
Net zero one initiative announced earlier
this year that will integrate both
on-site renewable power generation
including wind and natural gas based on
dairy cow manure.
The facility with a required investment
estimation between 700 million and 800
million dollars is expected to start up
in 2024.
since 2020 gevo has announced deals with
archer daniels midland
chevron corporation and total energies
and swiss-based commodities trading
company
traffic or group among others signing
off take agreements for future supplies
to date 1.6 billion in financiable
contracts are in place with over 20
billion being discussed already
looking into additional net zero
facilities over several years
gevo maintains a target of reaching one
billion gallons in production capacity
representing one billion dollars in
annual sales by 2030 or sooner.
Why did Gevo Stock drop?
Gevo stock (NASDAQ:GEVO) is down by more than 60%
percent from its high in early 2021. The
stock benefited hugely from a bull run
and massive market optimism while more
recently the stock has been under
pressure reflecting broader market
volatility inflation fed policy
uncertainty as well as the latest covert
concerns.
Will GEVO stock go back up?
The company notes that even with the growth
of electric vehicles and hydrogen-based
fuel cells that are set to gain
penetration
the addressable market may still be
upwards of 245 billion dollars for
liquid fuels even assuming the most
optimistic projections for
electrification
gevo is expecting growth of 270% in 2022
to 4.4 million dollars 252% in 23 to 15
million and 861 percent to 147 million
by 2024 as the net zero one facility
starts up on that point the company's
guidance is that the net zero one
facility can achieve a positive adjusted
ebitda of around 150 million per year
once operational.
Finally is Gevo a buy hold or sell now?
This is very important recently I've
been getting a lot of comments on one of
my videos regarding price sales being
used to value a company.
Using this ratio is simply wrong if a
company's valuation was based solely on
its sales then there would be no new
companies ever there is a vital stage in
a business development plan called the
pre-revenue stage
this is where a company will incur costs
without having any
revenue the best example of these
are listed here look at mining stocks
biotech stocks or even oil stocks
there might be years of operational
costs or research costs before there is
even one dollar of revenue think of
companies like tesla how many years did
tesla take to break even
or any pharmaceutical companies
how many years of research and drug
development
before they can ever make sales getting
back to Gevo by 2023 the stock could
begin to even appear cheap ahead of its
breakout year for sales as the company
ramps up production
of its net zero fuels.
gevo is high risk
and books research rate shares as a buy
with a price target of 7
and 50 cents per share for the year
ahead
the target implies a 1.5 billion market
cap although we are using the company's
guidance of 150 million in potential
annual ebitda from the future net zero
one facility as a reference point
in a recent press release gevo have
spoken about the process to reduce
greenhouse gas emissions and in this
they have spoken about
tracking sustainability with blockchain
technology gevo and block size capital
are exploring a partnership to develop a
dlt-based system called verity tracking
to take the first step to track the
sustainability attributes of renewable
transportation fuels such as ghg
emissions and water protection practices
through the value chain
it is anticipated that this could make
the value of the improved practices
accessible to larger markets by using
dlt to attach the key metrics for
sustainability to gallons of fuel it is
expected to enable a level of
sustainability assurance that has not
been seen before
and last month gevo signed the renewable
fuel supply deal valued up to 2.4
billion dollars which the company says
is the largest
ever deal for renewable fuels
under the deal gevo expects net zero 2
will generate 350 million dollars of
annual gross revenue over the eight
years of the agreement with calmer
gevo expects net02's all-in gross
revenue will total as much as 2.8
billion dollars including renewable
fuels and related products for the food
chain
So, What do analysts think of Gevo?
looking at tip ranks two analysts have
set 12 month price targets for gevo
stock in the last three months
the average price target is 17 with a
high forecast of 18 and a low forecast
of 16. this average is over 300 upside
from the current price
looking at market beat we can see that
gevo is currently in the bottom of its
50-day range and 52-week range this
indicates that although gevo has dropped
significantly
it could very well be undervalued right
now and the market cap for gevo has
dropped to only 840 million
with institutional ownership currently
at 36 percent
institutions have been buying gevo stock
throughout 2021 while the share price
has been dropping during the previous
two years 110 institutional investors
and hedge funds held shares of gevo the
most heavily invested institutions were
state street blackrock and invesco
we can see here that a sizeable
percentage of the float is being shorted
as has been the case through 2021 as the
share price has been dropping
and 3.7 days to cover is the highest
that this has been all year
looking at the most recent data
available on fintel
this has now increased to 4.25 days
while the short float has now increased
over 16 percent and the dark pool short
volume is currently over 1.1 million
shares
the three most recent ratings and price
targets
set here have been during 2021
by stefan nicholas
hd wainwright and nobel finance now
these price targets were set early in
2021 so I have been looking for more
recent updates and found that
hc wainwright analyst amit dale
maintained a buy rating on gevo less
than two months ago on november 11th
reiterating the price target of 18
while expecting gevo to post earnings
per share
of minus 9 cents for q4 2021
and on december 8 only last month noble
financials stick to their buy rating for
gevo setting a price target of 16
an analyst paul frat expects gevo to
post a negative eps of just seven cents
the next earnings report will be for the
full year 2021's annual report and if
the company keep in line with previous
years then we should expect to see this
in mid-march
in the past three years gevo published
their annual report on march 17th for
2021 and 2020
while reporting on march 27th back in
2019
looking at the most recent financial
statements that were published in
november we can see that gevo has total
assets of 675 million dollars and total
liabilities of just 115 million
this gives gevo an asset to liability
ratio of close to six to one
assets are largely made up of cash and
marketable securities which in total
amounts to over 350 million meaning that
the company is in a very strong position
financially and with such a strong asset
to liability ratio we can see that the
total stockholder equity for gevo is
over 550 million dollars
remember that this is a company whose
market cap is currently only 840 million
so gevo is now trading at approximately
1.5 times its net asset value
looking at the income statement we can
see that gevo still has very little by
way of revenue and after deducting all
expenses the company has a net loss for
the quarter of 14 million dollars and a
loss of 43 million for the year so far
it's worth noting here that gevo is
still largely pre-revenue and will
continue this way for the next two years
before revenue can really take off
so large losses are expected and it's
vital to have a strong cash position and
strong balance sheet while gevo (NASDAQ:GEVO)
currently have over 350 million in cash
and securities the cost of implementing
projects like the net zero one project
are likely to be huge
and we can see here from the notes to
the accounts the continued operation of
our business is dependent upon raising
additional
capital we intend to fund future
operations through additional private
and or public offerings of debt or
equity securities in addition we may
seek additional capital through
arrangements with strategic partners or
from other sources and it will continue
to address its cost structure so it is
likely that there will be
more delusion over the next two years
but in my opinion looking at the level
of cash burn at the moment they do
already have a significant amount
of the financing that is needed but this
is worth keeping in mind
guys if you appreciate the effort that
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looking through endless details to try
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like button it really helps the channel
grow and let's not forget that gevo has
signed other deals over the past few
months
with major companies such as new york
stock exchange listed chevron
and archer daniels midland company which
is also a major listed company
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at the current price I think this
provides a great opportunity to get into
gevo stock (NASDAQ:GEVO) while it is at its 52-week
low but this is just my opinion and not
financial advice
only invest money that you can afford to
lose because nothing is guaranteed in
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