- It has been a wild ride for the Gevo Inc (NASDAQ: GEVO) stock price this week. This is why.
It has been a wild ride for the Gevo Inc (NASDAQ: GEVO) stock price this week. The stock price went from $0.5491 on Wednesday to $2.16 a day later (Thursday August 20) only to close at $1.23 on Friday, August 21. And there were very specific reasons for the big jump and the big drop in those two days.
The Big Jump On Thursday
The stock price jumped after Gevo announced it exceeded $1.5 billion in long-term revenue contracts with the signing of Trafigura. Under the contract Trafigura is expected to take delivery of 25MPGY of renewable hydrocarbons, of which the majority is expected to be low-carbon premium gasoline with a smaller portion of the volume for sustainable aviation fuel (SAF), starting in 2023.
And this commitment will support Trafigura’s efforts to develop the market for low-carbon fuels including low-carbon premium gasoline. This agreement will enable Trafigura to supply SAF to both US and international customers whose interest is growing in low-carbon jet fuel.
“This is our largest single contract to date, and with it, brings Gevo to over $1.5 billion of revenue in long term contracts when added to the other contracts we have in place. As drop-in fuels, Gevo’s renewable, very high-octane gasoline and SAF are a perfect fit with Trafigura’s existing fuels business and will allow them to integrate these low-carbon options seamlessly into their supply chains. We expect that our low-carbon fuels will enable certain of Trafigura’s customers to substantially lower their carbon footprint,” said Patrick Gruber, Chief Executive Officer of Gevo.
The Big Drop On Friday
So why did the stock price plummet 32.42% on Friday? Gevo had taken advantage of its stock price more than tripling in order to announce a share offering. The trading volume was 35.2 million shares ahead of the open compared to the full-day average of 37.4 million.
And Gevo said it reached a deal with investors to sell 38.46 million shares at $1.30 each — which was 28.6% below the closing price of $1.82 on Thursday.
Other Details To Know
Gevo reportedly has about $500 million worth of take-or-pay-offtake agreements in place for a combination of renewable jet fuel and renewable isooctane for gasoline, according to Proactive Investors. And back in December 2019, Delta Air Lines said it was going to buy 10 million gallons of Gevo’s advanced renewable biofuels per year after Gevo completed the expansions of its Luverne, Minnesota facility.
Noble Capital Markets doubled its target price and maintained an Outperform rating on Gevo following the news about the company winning the Trafigura account. Specifically, Noble increased its 12-month target to $2.40 share from $1.20.
Gevo Stock: Buy Or Sell
Based on these details, a couple of analysts have marked Gevo as a buy. I plan to buy a few shares as well and monitor the stock closely to see whether to keep buying up more as the year goes on. Clearly this company has some serious momentum.