Biofuels are considered the primary substitute for fossil fuels in the automotive and aviation industry. As the United States is taking active steps to achieve zero carbon emissions in power generation by 2035 and total carbon neutrality by 2050, the demand for biofuels has been rising. The United States is the world leader in biofuel production by volume and has generated more than 47% of global output over the last 10 years.

According to a report by the Talking Democrat, the global advanced biofuels market is expected to reach $73.63 billion by the end of 2027, growing at a 23.7% CAGR during 2021 - 2027. The growth in the advanced biofuel market is driven by increased consumption of sustainable energy sources.

Given these factors, Wall Street analysts expect biofuel stocks Renewable Energy Group, Inc. (REGI), Gevo, Inc. (GEVO), Alto Ingredients, Inc. (ALTO), and Aemetis, Inc. (AMTX) to surge in price in the coming months.

Renewable Energy Group, Inc. (REGI)

REGI in Ames, Iowa, is a provider of lower-carbon transportation fuels in the U.S. and internationally. The company operates in Biomass-Based Diesel; Services and Corporate; and other segments. It produces biomass-based diesel from various low carbon feedstocks, and markets and resales biomass-based diesel, petroleum-based diesel, and raw material feedstocks acquired from third parties.

On Jan. 4, 2022, REGI acquired Amber Resources, LLC and its affiliated entities, M.O. Dion & Sons and Amber Petroleum Products. This acquisition is expected to expand the company’s footprint and add 60 million gallons/year of diesel sales to the company’s portfolio. This might expand REGI’s downstream offerings.

On Nov. 10, 2021, REGI entered a strategic partnership with Booster, a tech-enabled energy delivery service, to provide mobile delivery of sustainable fuels, including renewable diesel, biodiesel, and blended fuels. This partnership might help REGI reach new customers, promote sustainability, and boost revenue streams for the company.

In its fiscal third quarter, ended Sept. 30, 2021, REGI's total revenues increased 75.8% year-over-year to $1.01 billion. REGI's gross profit rose 20.2% from the prior-year quarter to $66.91 million. The company's income from operations increased 116% year-over-year to $51.06 million. And REGI’s adjusted EBITDA grew 25.2% year-over-year to 68.49 million. Its net income grew 87.4% year-over-year to $42.47 million and its net income per share available to common stockholders rose 62.7% year-over-year to $0.83.

Analysts expect REGI’s revenue for its fiscal fourth quarter, ended Dec. 31, 2021, to come in at $803.65 million, representing a 46.7% rise year-over-year. The Street expects REGI’s EPS to improve 35.5% year-over-year in the about-to-be-reported quarter to $0.81.

The stock has slumped 16.2% in price year-to-date and closed yesterday’s trading session at $35.55. However, both Wall Street analysts that cover the stock rated REGI rated it Buy. The 12-month median price target of $74.00 indicates a 108.2% potential upside. The price targets range from a low of $73.00 to a high of $75.00.

Gevo, Inc. (GEVO)

GEVO is an Englewood, Colo.-based renewable fuels company. The company offers renewable biodiesel, isooctane, sustainable aviation fuel, ethanol, and animal feed. It commercializes gasoline, jet fuel, and diesel fuel to achieve zero carbon footprint with various sustainable alternatives.

Last month, GEVO commenced bringing its wholly-owned dairy manure-based renewable natural gas project online. The project is expected to lead to annual distributions of $9- $16 million. It is expected to begin in late 2022 or early 2023, depending on the California Air Resources Board’s (CARB) Low Carbon Fuel Standard (LFCS) timing.

Last December, GEVO entered a financeable fuel supply agreement with Kolmar Americas Inc. for 45 million gallons per year of renewable and energy-dense liquid hydrocarbons produced from Net-Zero 2. The deal with Kolmar is valued at up to $2.4 billion over eight years. This partnership might extend GEVO’s global presence and boost its revenues because Net-Zero 2 is expected to generate approximately $300 million of gross revenue annually.

GEVO’s total current assets increased 333.9% year-over-year to $361.34 million over the nine months ended Sept. 30, 2021. The company’s total assets increased 344% over the nine months to  $675.36 million.

The Street expects GEVO’s EPS to improve 48.7% year-over-year in its fiscal fourth quarter, ended Dec.31, 2021. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.

GEVO has declined 21% in price year-to-date. However, both Wall Street analysts that cover the stock rated GEVO a Buy. The 12-month median price target of $10.50 indicates a 210.7% potential upside from yesterday’s closing price of $3.38. The price targets range from a low of $5.00 to a high of $16.00.

Alto Ingredients, Inc. (ALTO)

ALTO produces and sells specialty alcohols and essential ingredients in the U.S. The Sacramento, Calif., company operates in two segments: Production; and Marketing. ALTO also offers transportation, storage, and delivery services through third-party service providers. It operates more than seven ethanol production facilities across the U.S.

In January, ALTO acquired Eagle Alcohol Company LLC, a leading distributor of specialty alcohols. The acquisition is expected to grow its adjusted EBITDA by $7 million annually in 2023 and beyond. The company, through this acquisition, might expand its offerings, customer base, commercial opportunities and accelerate ALTO’s penetration of new high-margin markets.

Last December, ALTO announced that it restarted its ethanol production at its Magic Valley, Idaho facility in November 2021. The move is expected to result in a reorientation of ALTO toward high-value products, improved profitability, and sustainability. It is expected to contribute $9 million  in adjusted EBITDA annually.

In its fiscal third quarter, ended Sept. 30, 2021, ALTO’s net sales increased 49.3% year-over-year to $305.56 million. The company’s total current assets increased 5.9% over nine months ended Sept. 30, 2021, to $226.60 million. ALTO’s total assets grew marginally over the nine months to $483.40 million.

The $323.30 million consensus revenue estimate for its fiscal fourth quarter, ended Dec. 31, 2021, represents 91.5% year-over-year growth. The $0.31 consensus EPS estimate  is expected to  416.7% year-over-year in the about-to-be reported quarter.

The stock gained 16.4% in price year-to-date and 15.9% over the past six months. ALTO closed yesterday’s trading session at $5.60. The 12-month median price target of $16.00 indicates a 204.8% potential upside.

Aemetis, Inc. (AMTX)

AMTX in Cupertino, Calif., is a renewable natural gas, fuels, and bio-chemical company in North America and India. The company produces and markets biodiesel and refined glycerin to transport companies, distributors, resellers, and refiners. In addition, it produces and sells ethanol, industrial and portable alcohol, wet distiller grains and oil, condensed distillers solubles, healthcare, and sanitary products.

Last week, AMTX signed an offtake agreement with Japan Airlines to supply 90 million gallons of blended sustainable aviation fuel over a seven-year term. The agreement might promote sustainability and boost revenue streams for the company.

This month, AMTX signed agreements with SunPower and Schneider Electric to build and design a solar microgrid system comprising an almost 2 MW photovoltaic array and a 1.25 MW battery energy storage system enabled with AI for renewable fuel. This agreement is expected to promote sustainability by reducing the carbon intensity score of the company’s ecosystem and boosting profitability.

AMTX’s revenues increased 21.9% year-over-year to $49.90 million in its fiscal third quarter, ended Sept. 30, 2021. AMTX’s cash and cash equivalents grew 979.2% over the nine months ended Sept. 30, 2021, to $6.39 million. The company’s total assets increased 17.5% over the nine months to $146.98 million.

The $57.00 million consensus revenue estimate for its fiscal fourth quarter, ended December 2021 represents 52.7% year-over-year growth. Analysts expect AMTX’s EPS to improve 64.8% year-over-year in the about-to-be-reported quarter. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.

Over the past year, the shares of AMTX gained 32.8% in price and closed yesterday’s trading session at $10.20. The 12-month median price target of $28.50 indicates a 155.8% potential upside. The price targets range from a low of $25.00 to a high of $33.00.

REGI shares were trading at $36.04 per share on Tuesday morning, up $0.49 (+1.38%). Year-to-date, REGI has declined -15.08%, versus a -6.15% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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