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Gevo gets 12-month target price increase by Noble Capital to $5.00 a share from $3.50 a share previously

Published: 10:50 31 Dec 2020 EST

Gevo Inc -
The broker maintained an 'Outperform' rating on Gevo's stock

Gevo Inc. (NASDAQ:GEVO) has had its 12-month target price increased by Noble Capital to $5.00 a share from $3.50 a share previously, with the broker maintaining an 'Outperform' rating on the stock.

In a note to clients, Noble's analysts said: "We believe the high risk/high reward profile remains attractive even after the 308% stock price run since 3Q2020 results were reported. Not only is the balance sheet now debt-free, financial risk has also moderated and the prospects for 2H2021 financial closing on at least Tranche 1 (the first development phase) have improved."

They added: "Additional supply commitments and hitting other milestones/catalysts would bolster the project financing prospects."

READ: Gevo options 239 acres in South Dakota for a planned renewable hydrocarbon production facility as part of Trafigura contract

The Noble analysts noted that in Gevo's updated ATM equity prospectus, investors learned that its convertible debt was fully converted into equity after the strong stock price performance in December and 5.67 million shares were issued to Whitebox to retire the debt, including PIK interest and a make-whole payment.

About $14 million of cash was preserved and current cash is $79 million, they added, while ATM equity issuance in 4Q 2020 raised $6.2 million and warrant exercises added around $0.4 million.

The analysts highlighted potential milestones/catalysts for Gevo over the next year including expanding the supply contract portfolio with new industry/financial partners; identifying engineering firm performing FEED work; identifying equity and debt project financing partners; awarding an EPC (Engineering/Procurement/Construction) contract to a construction firm; financial closing of project debt/equity financing that allows the construction on the Tranche 1, the first project, to move forward; and investing in RNG projects.

Other potential catalysts include the friendly green energy stance from the state/federal governments, favorable environmental legislation, and the heightened focus on ESG (Environmental, Social and Governance) investing where Gevo screens well, the Noble analysts added.

With talks advancing on new supply agreements with potential customers, including industry players, and development pipeline expanding, the analysts said that they expect an update soon on discussions on additional supply agreements and the status of project financing.

Contact the author at jon.hopkins@proactiveinvestors.com

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