Gevo Inc (NASDAQ: GEVO) has been an interesting stock to watch in the first month of 2021. The stock saw dramatic gains throughout the majority of January, before dipping some, yet holding onto a big chunk of its profits.
There are several reasons to be excited about GEVO stock, which is why I believe it has the potential to become one of the best performers in the market in 2021, and likely beyond. Here’s how I see it:
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Net Zero Gas Production Is on the Way
Everything seems to be falling in place for Gevo at the moment. The clean fuels company seems to be on track to seriously ramp up production, while allowing for traditional-feeling vehicle use.
Recently, the company announced that it will be moving forward with the development of its Net Zero 1 production facility. At this facility, the company will be producing a clean option to gasoline and jet fuel using renewable feedstock. However, the big difference between this and its other production facilities, this new production facility will be a net zero facility.
What’s that mean?
Net zero means that overall, the production facility will not be adding to the release of greenhouse gasses into the environment. Any greenhouse gasses emitted by the facility’s operations will be offset, bringing the facility’s emissions to “net zero.”
What’s the big deal?
Well, the environment conversation has been a hot topic for several years, and it looks like we’re going to see efforts within the government and around the world to push for clean energy. So, the fact that GEVO will be producing clean-burning fuels, using renewable feedstocks, in a net zero facility bodes well with the shift to clean energy and makes the stock an exciting investment opportunity.
GEVO Is a Big Political Winner
In the 2020 elections, Joe Biden became the President of the United States. That’s great news for the clean energy industry as a whole, including GEVO. After all, President Biden has been very clear about his views toward environmental changes caused by greenhouse gasses and that something needs to be done to curb the issue.
Moreover, the democrat party, the party that has been the biggest proponent of clean energy, has taken over control of Congress and the Senate. This means that the leadership in Washington D.C. is likely to make major changes to increase the use of clean energy, and do away with fossil fuels.
For Gevo, that’s big news.
The company is likely to benefit from regulation and taxing on traditional fuels that increase their prices, making GEVO a more competitive option. At the same time, there will likely be government grants that fund research to improve upon current clean energy concepts, increase production of clean energy alternatives, and more. Not to mention the likely tax cuts to companies in the clean energy space and consumers that use their products.
All in all, the election season was a massive win for GEVO that set the stage for dramatic gains throughout the 2021 year and for several years to come should the company play its cards right.
EVs Aren’t What They’re Cracked up to Be
I know, some of you are thinking, “Josh, you’re an idiot. Electric vehicles are more prevalent than Gevo fuels, already solving the problem of greenhouse gas emissions in transportation.” Yes, I actually received an email with something to that effect recently.
Well, that’s not the case. The fact of the matter is that electric vehicles aren’t all they’re cracked up to be.
Think about it from a utility standpoint. Sure, EVs are a strong option for short-range driving. Going to work, shopping, and going out to dinner are great options. But driving isn’t always short range.
Imagine planning a road trip and your first hotel is 400 miles away. You charge your car and drive about 250 miles before you have to charge again. Unlike fueling up, charging takes hours. Moreover, finding charging stations isn’t as easy as you thought it would be when driving in a rural area.
So, what do you do?
You’re probably going to need a tow.
Gevo fuels are far more utilitarian than electric vehicles. In the same instance, the traveler would drive 250 miles, pull up to a gas station, fuel up, and continue on their trip, as is the case with traditional vehicles because the fuels produced by GEVO are designed for traditional engines.
The bottom line is that electric vehicles have their place, but they don’t solve the problem of transportation-related greenhouse gas emissions as they simply don’t make sense for the vast majority of drivers who use their vehicles to go on vacations, travel for business, or a wide range of other long-range activities.
The bottom line is that Gevo is filling a need, and currently, the only one effectively doing so.
What Analysts Think About GEVO
There aren’t many analysts covering GEVO stock. However, what the company is lacking in volume of analyst coverage, it makes up for in quality of coverage. At the moment, two analysts rate the stock a Buy with no Hold or Sell ratings.
The consensus price target is $10.50, with a high target of $14.00 per share, representing significant growth potential on the high side. Moreover, the price targets were announced prior to the Net-Zero 1 announcement and a recent announcement that gave the company all the money it needed to get through the next couple of years and to develop two Net Zero production facilities. As such, these price targets are likely to be revised upward relatively soon.
Risks to Consider Before Buying GEVO
Gevo is an investment, and as an investment, it comes with risk. While I am very bullish on the stock, risks should always be considered before making any investment, regardless of how good it looks. Some of the most significant risks associated with investing in GEVO include:
- Profitability. Gevo generates quite a bit of revenue through the sale of its clean fuels. However, that revenue and more is being spent on infrastructure with the goal of expanding production capacity to meet demand. As a result, the company is operating at a loss.
- Speculation. A bet on GEVO stock is a speculative one. While I believe that demand for clean fuels will be dramatic, there is no guarantee that this will be the case. Ultimately, a bet on Gevo is a bet that we will see major regulatory changes in the energy sector, and that the company’s products will rise as superior alternatives to electric vehicles.
The bottom line here is simple, Gevo has been working for several years to get to this point. Today, the company is going through aggressive expansion efforts in an attempt to blitz the market with its clean fuels as clean energy takes center stage.
While there are risks to consider, if all goes well GEVO will quickly become a blue chip stock and those that got in early will experience a dramatic return of value making this a stock that’s one to watch closely.