GEVO Inc [NASDAQ: GEVO] is a top performer today and is up by over 200%. This comes after the company announced that it had entered into a revenue contract with Trafigura. The agreement is a long-term take or pay contract that is worth $1.5 billion and is the biggest deal in Gevo history.
Under the deal, Trafigura, a world-leading commodity trader, will receive 25 MPGY of renewable hydrocarbon. The deal is expected to become operational in 2023 and is part of Trafigura’s strategy to develop a market of low-carbon gasoline. Commenting on the deal, Gevo CEO Patrick Gruber stated that the deal was bringing in $1.5 billion to the company. He added that the company expected to be of value to Trafigura by helping the commodities giant lower its carbon footprint. The deal has seen Gevo form a bullish reversal pattern as the market adjusts the price to reflect the news.
The momentum that this deal has created could be followed by a rally that could run into the foreseeable future for several reasons. First investors are anticipating a long-term jump in revenues to the tune of $1.5 billion. This could see long-term investors take positions in this stock, and in the process support the upside price momentum.
Secondly, the company has a number of other projects that likely to drive the value of this stock long-term. Earlier in the week, the company stated that had entered into a partnership with Praj in a deal that will lead to the commercialization of sustainable aviation fuel in the Indian market. Under the deal, Gevo will offer its technology to Praj under license, while Praj will offer EPC services and plant equipment. Gevo will also license its services refineries and help them convert isobutanol to premium gasoline.
On this deal, Gevo CEO Patrick Gruber stated that jet fuel made with their technology can reduce greenhouse gas emissions. Given that India is one of the most important markets for the global oil and gas industry, the deal is likely to drive up the company’s stock value in the long run. That’s because as revenue from the deal materializes, the intrinsic value of the deal will increase and reflect in the stock price.
The stock could also get a boost from the approval of a COVID-19 vaccine. A vaccine would lead to a rally in the entire market, and stocks with strong fundamentals such as Gevo would benefit immensely.
Gevo Inc. is a renewable energy company. It sells diesel, jet full and aims to reduce greenhouse gas emissions. It is based in Englewood, Colorado.