Gevo shares bounce back 18% despite disappointing results

Although alternative fuel company Gevo posted deeper-than-expected losses for the fourth quarter, analysts stuck to their optimistic price targets.

  • Gevo Inc (Nasdaq: GEVO) share price hits US$10.01 per share, up 18%
  • Its revenue for 4Q20 plummeted by 92% and missed analysts’ forecasts
  • The Luverne facility, which makes ethanol, is still shuttered until further notice
  • Nonetheless, Gevo attracted an average price target of US$17 from analysts
  • Trade Gevo shares with an IG account

Gevo shares regain momentum

Volatility is persisting in Gevo’s share price, with the counter soaring 18% day-on-day to finish at a three-week high of US$10.01 on Friday (19 March 2021).

Shares of Gevo, which produces sustainable low-carbon biofuels and chemicals, had sunk 10.3% last Thursday, a day after its fourth-quarter financial results came in below market expectations.

Two analysts covering Gevo maintained their ‘buy’ ratings as of Sunday (21 March 2021), with an average 12-month target price of US$17 per share, according to Bloomberg data. That implies potential upside of 69.8% based on last Friday’s closing price.

Gevo reports worse-than-expected results

Last Wednesday (17 March 2021), the renewable chemicals and advanced biofuels firm reported that its revenue for the fourth quarter of 2020 totalled US$531,000, a steep 92% plunge from US$6.9 million in the year-ago period. It also missed analysts’ average forecast of US$755,000 by nearly 30%.

The lower top-line was partly due to zero revenue from its production facility in Luverne, Minnesota, for ethanol sales and related products, compared to US$5.9 million during October-December 2019. The company had in March 2020 terminated its production of ethanol and distiller grains at the Luverne facility, which remains shut down until further notice.

Meanwhile, loss from operations deepened to US$7 million for the fourth quarter, from a US$6.2 million loss a year ago, and also underperformed research teams’ consensus forecast of a US$5.7 million loss.

Adjusted net loss per share was US$0.07, worse than analysts’ expectations of US$0.04 loss per share. However, it was an improvement from the US$0.50 adjusted net loss per share in the fourth quarter of 2019.

What’s next for Gevo?

The firm’s Net-Zero 1 project, to be located in South Dakota, is expected to produce 45 million gallons per year of energy-dense liquid hydrocarbons, Gevo said. These products, when burned as transportation fuels, should have a net-zero greenhouse gas footprint. The project will also produce protein-rich animal feed, corn oil, and its own biogas.

Gevo CEO Patrick Gruber last week said the company has secured customers for Net-Zero 1, and Citigroup is helping with the debt financing. The project’s economics ‘are attractive at this stage’, Gruber added.

As for its Net-Zero 2 project, Gevo is making ‘great progress’ on filing up production capacity, Gruber said.

For the first quarter of 2021, Gevo’s revenue could dip to US$320,000, while operating loss may shrink sequentially to US$6.6 million, according to analysts’ forecasts compiled by Bloomberg.

The analysts also foresee adjusted loss per share narrowing quarter-on-quarter to US$0.035 for January-March this year.

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