Analyst: Biofuel Company Gevo Could More Than Quadruple Revenue By 2025

Advanced biofuels company Gevo, Inc. GEVO notched an upgrade from H.C. Wainwright Friday that was driven by material company developments and strong growth projections.

The Analyst

Analyst Amit Dayal upgraded Gevo from Neutral to Buy with a price target of $10.

The Thesis

Gevo' recent company developments include the following, Dayal said in the upgrade note. (See the analyst's track record here.) 

• A bolstered balance sheet.
• Plans to improve cash flow.
• An agreement that paves the way to expand the Luverne, Minnesota facility. 
• The broader company outlook released Aug. 30. 
• H.C. Wainright projects that Gevo's revenue will rise from about $33 million in 2018 to more than $140 million in 2025. 

Gevo has leveraged new production capabilities for materials such as ethanol and isobutanol, as well as refocused on important key drivers like jet fuel, Dayal said. 

“The company believes that the current gasoline blend market is 7 billion gallons per year in the U.S. alone and that isobutanol’s premium pricing as a blend could allow it to generate margins as high as 50 cents to $1 per gallon," the analyst said.

"The company has the opportunity with its bolstered balance sheet to not only expand its existing isobutanol production capacity but also to build new plants." 

These opportunities, along with the manufacture and sale of "higher-value hydrocarbons" such as isooctane, osooctene and jet fuel, are critical growth drivers for the company, Dayal said. 

Gevo's Q2 print on Aug. 8 showed revenue of $9.4 million compared to $7.5 million in 2017. The company had total principal value debt of $13.6 million at the end of the quarter, according to H.C. Wainwright. 

Price Action

Gevo shares were up 5.4 percent at $4.09 at the time of publication Friday afternoon.

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