H.C. Wainwright has maintained its Buy rating and $14.00 price target for Gevo (NASDAQ:GEVO), Inc. (NASDAQ: GEVO), following the company's announcement of a significant acquisition.
Gevo, a renewable chemicals and advanced biofuels company, has entered into a definitive agreement to purchase the ethanol production plant and carbon capture and sequestration (CCS) assets of Red Trail Energy (REGX) for $210 million in cash.
This strategic move is aimed at expanding Gevo's production capabilities and enhancing its sustainability profile.
The acquisition, which was announced on Wednesday, includes a 65 million-gallon-per-year ethanol facility situated on a 500-acre site. This facility, located in North Dakota, also comes with carbon sequestration pore space lease agreements that cover an additional 5,800 acres.
The ethanol produced at this plant is distributed across various North American markets, including regions with high demand for low-carbon products like Oregon, Washington, British Columbia, and Alberta.
The site's CCS capabilities are notable, with the potential to sequester up to 1 million metric tons of carbon dioxide annually. Currently, the facility captures approximately 160,000 metric tons of carbon each year. In addition to ethanol, the plant produces over 200,000 tons of distiller grains and vegetable oil co-products annually, further diversifying Gevo's product offerings.
Gevo plans to finance the acquisition through a combination of asset-level debt and available cash on its balance sheet. The company's decision to maintain its operations and expand its low-carbon product portfolio aligns with the growing demand for sustainable energy solutions.
InvestingPro Insights
As Gevo, Inc. (NASDAQ:GEVO) moves forward with its latest acquisition, investors are closely monitoring the company's financial health and market performance. According to InvestingPro data, Gevo currently holds a market capitalization of $214.35 million, which is a key figure for investors gauging the company's size and market value. Despite the challenges highlighted by a negative P/E ratio of -3.03 and gross profit margins in the red at -105.98% for the last twelve months as of Q2 2024, the company has experienced significant revenue growth of 98.34% during the same period. This growth is indicative of the company's expanding operations and may be a positive sign for future profitability.
InvestingPro Tips suggest that Gevo's stock price has been quite volatile, which might be of interest to investors looking for short-term gains. The company has seen a strong return over the last week, month, and three months, with price total returns of 26.62%, 38.7%, and 51.49% respectively. However, it's important to note that analysts do not anticipate the company will be profitable this year, and Gevo has been quickly burning through cash. These factors should be considered when evaluating the company's long-term growth prospects.
For those seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/GEVO, which can offer further guidance on Gevo's financial health and market position. This acquisition may be a pivotal step for Gevo, but investors should weigh the potential risks and rewards carefully, armed with the latest data and expert insights.
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