We recently compiled a list of the 10 Best Penny Stocks to Buy Under $1. In this article, we are going to take a look at where Gevo, Inc. (NASDAQ:GEVO) stands against the other penny stocks under $1.
Penny stocks are defined by the Securities and Exchange Commission (SEC) as stocks that trade for less than $5 per share. They exhibit high price volatility due to their low pricing. Even a slight movement in the stock price can translate into a substantial percentage gain. Despite this advantage, it’s important to be aware of the risks associated with penny stocks. A study conducted by the Securities and Exchange Commission (SEC) found that most penny stocks are speculative and have low liquidity, which makes it challenging to trade them. Only around one in 1,000 penny stocks goes on to become profitable mid-cap or large-cap businesses, according to the study. Therefore, even if penny stocks seem attractive, investing in them needs a thorough assessment of the dangers as well as the possible benefits.
Penny stocks may provide large profits, with particular industries expected to develop in 2024 as a result of technological improvements, legislative changes, and altering customer tastes. These dynamic industries may be of interest to investors looking to diversify their portfolios or seek strong growth potential.
Among the industries where one might look for penny stocks to purchase in 2024 is renewable energy. It has experienced tremendous growth in recent years. The global renewable energy industry was estimated at $1.21 trillion in 2023, with a compound annual growth rate (CAGR) of 17.2% between 2024 and 2030, per Grand View Research. In 2023, Asia Pacific had a noteworthy revenue share of 40.98%.
The IEA’s Renewables 2023 study states that in 2023, the capacity of renewable energy worldwide increased by 50% to approximately 510 GW, with solar photovoltaics accounting for three-quarters of these increases. Leading the way, China added twice as much solar PV as the rest of the world in 2022 and had a 66% rise in wind power. According to IEA 50, renewable energy capacity increased at unprecedented rates in Brazil, the United States, and Europe. As per the latest IEA research, under present policies and market circumstances, worldwide renewable capacity would rise by two and a half times by 2030. Hence, investors may interact with innovative companies at the forefront of solar, wind, and other renewable technologies by purchasing penny stocks in the renewable energy space.
Biotech penny stocks also provide a unique investment opportunity for investors interested in medical innovation and the potential of major breakthroughs in healthcare. Recent analysis by investment bank Jefferies indicates that biotechnology businesses raised about $10 billion in follow-on stock offerings in January and February, signaling increased optimism in the industry.
The size of the worldwide biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion, per Precedence Research. Currently, the biotechnology industry consists of 673 publicly traded stocks, including penny stocks, with a combined market capitalization of $1,511.21 billion.
Investors interested in biotech stocks may question which sectors are prone to buyouts. Laura Chico, Senior Biotechnology Analyst at Wedbush Securities, noted key areas to keep an eye out for possible buyouts:
“Obesity has been a really big theme in 2023, and will probably continue for the foreseeable future, but across the area, at least in these recent M&A transactions, it’s been really broad-based, and I think that’s really a testament to the innovation in the space. We have several deals in oncology, immunology, inflammation, neuro, and even rare diseases. So it’s not just within certain verticals at this point.”
Methodology:
In this article, we first used a stock screener to list down all stocks trading under $1 (as of the writing of this article) with over 40% institutional ownership. From the resulting dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
25 Countries with Biggest Carbon Footprint Per Capita
Gevo, Inc. (NASDAQ:GEVO)
Number of Hedge Fund Investors: 10
Gevo, Inc. (NASDAQ:GEVO). is a company engaged in carbon abatement. It specializes in the conversion of renewable energy and carbon into energy-dense liquid hydrocarbons suitable for use as renewable fuels, such as sustainable aviation fuel. It concentrates on drop-in fuels for vehicles, such as diesel, jet fuel, and gasoline. Through the utilization of modern manufacturing methods and low-carbon renewable resources, their products are designed to achieve net-zero greenhouse gas emissions throughout. Gevo’s technique can also be used to make sustainable polymers like polyester from environmentally favorable materials. The sale of these low-carbon materials and fuels generates revenue. The company is positioned for substantial development in the multi-billion-dollar low-carbon fuels industry by utilizing patented fermentation and conversion methods boosted by technology obtained from Axens North America, Inc.
The business is divided into three segments: Renewable Natural Gas (which produces methane gas from dairy cow dung), Agri-Energy (which runs the Luverne facility for the manufacture of isobutanol and ethanol), and Gevo (which is concentrated on SAF, renewable hydrocarbons, and intellectual property).
Gevo’s stock, which was initially valued at $151,800, has since dropped to $0.59. It remained stagnant after the drop to date. Gevo’s stock fell as a result of excess costs, dropping oil prices, and technological challenges in scaling up biofuel production, which diminished the economic attraction of biofuels as a less expensive option. Cash is a significant element in the company’s share price suppression. The company struggles to raise the necessary capital to support its large-scale projects, which have an average cost of $850 million.
When faced with limited financial resources, GEVO frequently turns to share dilution, an approach that has gained momentum recently. Investors are alarmed by the company’s dependence on these tactics because they fear more dilution in case GEVO’s projects fail to produce the desired results. The possibility of further share dilution might put negative pressure on the stock price of the company. The company has over $376 million in cash right now, which will cover over 4 years of operating expenses if they remain the same at $91.1 million as in the last 12 months.
On the bright side, Gevo’s subsidiary Verity recently joined with ClearFlame to promote carbon traceability in US road freight transportation, with the goal of decarbonizing the sector, which consumes around 29 billion gallons of gasoline each year. Financially, Gevo has faced an incredible 1363.83% surge in annual revenue, from $1.18 million in 2022 to 17.2 million in 2023, primarily due to sales of RNG and environmental attributes from our RNG project. Gevo’s Q1 2024 report discloses that its Net-Zero 1 project has successfully managed costs, and its RNG project has produced positive results with $1.2 million in non-GAAP cash EBITDA.
One of GEVO’s major projects has been the sustainable fuel production plant in South Dakota, which aims to house considerable production while providing over 1000 employees in the area. GEVO operates in the renewable energy industry and is expected to experience strong momentum due to increasing demand for green energy generation. Most importantly, the company has the potential to make a substantial impact in the sustainable aviation fuel market, which is projected to reach $41.6 billion by 2032 at a CAGR of 46.9%, per DataHorizzon Research. Given Gevo, Inc. (NASDAQ:GEVO)’s upside potential in the renewable energy sector, it has received an average price target of $4.76, reflecting analysts’ bullish outlook on the stock. The price target reflects a potential upside of over 754.27% from the current stock price of $0.56. Meanwhile, 4 analysts have given the stock a “Buy” rating.
10 out of the 920 hedge funds polled by Insider Monkey during this year’s first quarter held a stake in Gevo, Inc. (NASDAQ:GEVO). Steve Cohen’s Point72 Asset Management held the largest stake in the company, with 1,500,000 shares worth $1.15 million.
Overall GEVO ranks 8th on our list of the best penny stocks to buy under $1. You can visit 10 Best Penny Stocks to Buy Under $1 to see the other penny stocks that are on hedge funds’ radar. While we acknowledge the potential of GEVO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GEVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.