Gevo share price: Why analysts are still bullish

Shares of loss-making alternative fuel company Gevo have continued to trend downwards despite recent positive news.

  • Gevo Inc (Nasdaq: GEVO) share price sinks 0.6% to US$6.98 per share
  • An increased offtake deal and a Germany partnership were not enough to lift the stock
  • Analysts remained positive on Gevo, with an average US$17 target
  • Loss from operations for 4Q20 could narrow, analysts believe
  • Trade Gevo shares, long or short, with an IG account

Gevo stock loses steam

Shares of Gevo, which makes sustainable low-carbon biofuels and chemicals, fell 0.6% day-on-day to finish Friday at a three-month low of US$6.98. But year-to-date, it is still up by more than 60%.

The stock price had been declining since mid-February, after rallying in the past several months.

Gevo shares hit a four-year high of US$14.61 on 12 February 2021, surging from just US$1 in early November 2020.

Investor optimism grew when US President Joe Biden’s climate-friendly push was seen as favourable towards the renewables sector; positive analyst commentary on the firm’s prospects also boosted its shares.

New deals not propping up share price

But the stock’s momentum has slowed, despite a string of partnerships and deals.

A recent Nasdaq article opined that Gevo could be a ‘highly speculative bet’ as it remained unprofitable, light on revenue and had a history of diluting its stock after announcing positive news.

The company on 22 February 2021 said Scandinavian Airlines Systems has increased the amount of sustainable aviation fuel it is willing to purchase from Gevo, to five million gallons per year. Gevo also expects to ink more offtake agreements this year.

And on 24 February 2021, Gevo announced it will partner HCS Group to develop and build a renewable hydrocarbon facility in Germany. The first project is estimated to produce 22 million gallons per year of renewable hydrocarbons, advanced renewable fuels, and low-carbon sustainable aviation fuel by end-2024.

A Forbes article recently flagged concerns over the execution of Gevo’s large supply contracts, given its complex production process. Moreover, the company’s fuel is likely to be more expensive than traditional fossil fuels, which means its offtake deals might rely largely on subsidies and favourable regulation, the article noted.

As of Sunday, HC Wainwright & Co had a ‘buy’ rating with a US$18 target price, while Noble Capital Markets recommended ‘outperform’ with a US$16 target. Their average target price of US$17 implies 144% potential upside based on Friday’s close.

Will Gevo deliver a better showing?

The renewable chemicals and advanced biofuels firm will report its fourth-quarter results on 18 March 2021. Analysts expect Gevo’s adjusted loss per share to come in at US$0.04 for the October-December period, an improvement from the US$0.08 loss per share in the third quarter, according to Bloomberg data.

Total revenue could almost triple to US$755,000, based on analysts’ average estimates on Bloomberg, from US$192,000 in the previous quarter when Gevo’s sales were hit amid an unfavourable commodity environment.

Meanwhile, its loss from operations is likely to narrow to about US$5.7 million, compared to the US$6.1 million loss from operations in 3Q20, the research teams forecast.

How to trade Gevo shares with IG

Are you feeling bullish or bearish on Gevo’s stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform, or by investing in the share directly, in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Gevo> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

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