Gevo Stock Forecast: The Clean Energy Producer

Gevo Stock Forecast: Until recently, environmentally-conscious investors were the primary source of funding for companies developing advanced biofuels. However, next generation clean energy is now attracting interest from mainstream investors. Tapping into alternative energy sources and developing advanced options means greater efficiency and lower cost, in addition to the environmental benefits.

Of course, the question for investors is, which biofuel company is most likely to make clean energy profitable? Gevo has seen some success in developing advanced biofuels that meet clean energy standards, and some investors think it will be a major player in the future of the clean energy industry.

The Benefits and Risks of Investing in Clean Energy

There is more to clean energy than simply finding methods of reducing carbon emissions. After all, low-carbon fuel isn’t a new concept. Humans have used solar, wind, and water to power machines for thousands of years. Today’s biofuels must meet expectations around carbon emissions, but that’s not the end of the story – they still have a whole host of obstacles to overcome.

First, the alternative fuels must be produced in a sustainable manner. It doesn’t make sense to use high-emissions energy to generate low-emissions fuel. Second, the expense of installing an entirely new infrastructure to support alternative fuels is prohibitive. Biofuels must be compatible with existing infrastructure if there is any hope of making the transition.

An ideal clean energy solution would reduce carbon emissions and work within existing infrastructure, all the while using land responsibly. Companies developing biofuels want to design an energy solution that is highly efficient, making it financially practical to switch. The company that succeeds in creating such a solution is likely to generate strong revenues and healthy profits, which is good news for investors.

Clean Energy Investing Risks

The bad news is that companies developing and producing clean energy solutions face risks on a number of fronts.

Investors take on a portion of that risk when they choose to buy stock in the business. Examples of risks facing clean energy producers include unreliable access to the components required for productions. Of course, there is no chance of running low on wind and solar power, but companies that need a constant supply of energy crops, waste streams, or residues could experience interruptions in the supply chain.

The regulatory landscape presents another risk for companies working in biofuels, and by extension, that risk is passed on to investors. Many nations have dabbled in creating policy that supports environmental initiatives, and there have been occasional incentives for businesses and consumers who meet certain environmental goals.

Unfortunately, very few countries can boast a consistent long-term policy that supports alternative energy sources. Policies tend to come in and out of fashion when political power changes hands. That makes it exceptionally difficult for businesses to project financials – and even more difficult for investors to choose the right stocks for their portfolios.

Gevo: The Innovative Energy Solution

Gevo is an important player in the biofuels and renewable chemicals industry. It is focused on developing and implementing technology that can replace fossil-based fuels and chemicals with renewable carbon alternatives.

Unlike many of its clean energy competitors, Gevo doesn’t work with solar and wind energy sources. Instead, it has created technology that pulls carbon from the environment and repurposes it for energy production.

Gevo [GEVO] thinks big and boldly says, “We want it all.” By “all”, the company means it intends to supply advanced biofuels for cars, boats, ships, trucks, and airplanes. Gevo doesn’t stop there – it is also working on replacing the carbon source for plastics used in packaging, such as polypropylene and polyester. 

Gevo technology has its foundation in synthetic biology and chemical industry production techniques. It has advanced a method of converting carbohydrates into low carbon fuels and chemicals. Carbon is pulled from the atmosphere by plants, and Gevo processes the plants to access it. The company also extracts the plants’ protein and uses the combination to produce alcohols like  isobutanol and ethanol.

The alcohols can be used as they are for fuel or chemicals, but Gevo adds an additional step. Through proprietary processing methods, it converts alcohols into rubber, jet fuel, polyester, and gasoline. All of this is done using sustainable growing and manufacturing processes, making Gevo a truly green company – but what investors want to know is whether Gevo is well-positioned for future growth and profit.

Gevo Stock Forecast: Is It A Buy? 

When Gevo held its IPO in February 2011, analysts were excited. Within weeks, stock prices went from their initial price of $15 to more than $150 per share. That excitement was short-lived, and share prices dropped precipitously. By June 2011, they were down to $95 per share. At the end of the year, they were in the mid-$30s.

The decline continued – although a bit more gradually – and in September 2014 prices dropped below $2 per share. They have hovered in that area ever since. Unfortunately, despite the company’s promising technology and ambitious goals, it simply hasn’t been able to turn a profit.

For the second quarter of 2019, revenues came in at $5.1 million, but operations costs prevented any profit. In fact, the company’s total second quarter loss was ($6.5) million – a net loss per share of ($0.60). This disappointed current shareholders, who expected a turnaround by now.

In September 2019, Gevo stock spiked after the company announced that its research and development team succeeded in breakthrough technology. The new process can convert low-carbon isobutanol and low-value fusel oils into renewable diesel. Fusel oils are byproducts from the production of alcohol. Business leaders believe this new type of renewable diesel will successfully compete with existing diesel fuels, both natural and petroleum-based, offering benefits like reduced carbon dioxide and particulate emissions.

While the stock price didn’t sustain the gain, it also hasn’t dropped to pre-announcement levels, giving some investors reason to think share prices are on their way up. Many people believe that Gevo is making an important contribution to the future of sustainable energy, and Gevo was named to Biofuels Digest’s Next 50 Companies to Disrupt the World list. 

The company’s stock price doesn’t currently reflect its position as a leader in biofuels, which could mean a bargain for investors who buy now.  It’s a risk – there are a lot of things that could go wrong – but if Gevo succeeds in its mission, the rewards could be substantial.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.