Gevo, Inc.

GEVO Details

Gevo Options Site to Purchase Production Facility: Gevo, Inc. (NASDAQ: GEVO) is a renewable chemical and advanced biofuels company, which is involved in the enhancement of biobased alternatives to petroleum-based products. On December 21, 2020, the company stated that it has optioned the right to purchase ~239 acres of land near Lake Preston, SD, which is anticipated to produce ~45,000,000 million gallons on an annual basis together of jet fuel and renewable gasoline products. 

3QFY20 Key Financial Highlights: During the quarter, the company reported revenues of $0.2 million, down from $6.1 million in the prior corresponding period. Lower sales were led by the termination GEVO’s production of ethanol and distiller grains in March 2020, due to COVID-19 led uncertainties and response to an unfavorable commodity environment. Gross loss during the quarter came in at $2.1 million as compared to a gross loss of $3.8 million reported in pcp. In 3QFY20, research and development expenditure was reduced by $0.9 million, owing to lower personnel and consultant expenses. Loss from operations during the quarter came in at $6.1 million, whereas non-GAAP cash EBITDA loss stood at $4.0 million. The company exited the quarter, with a cash balance of $80.6 million, up from $6.3 million, recorded at the end of the previous quarter.

3QFY20 Financial Highlights (Source: Company Reports)

What to Expect: Owing to the robust balance sheet and available cash, the company predicts that it will pay off the entire outstanding balance of $12.7 million of the 2020/21 Notes as on December 31, 2020. Upon repayment of the outstanding debt, the company will have no outstanding debt secured by all of its assets.

Stock Recommendation: The stock of GEVO closed at $4.82 with a market capitalization of ~$576.6 million as on 28 December 2020. The stock made a 52-week low and high of $0.46 and $4.95, respectively, and is currently trading close to its 52-week high level. The stock has delivered a positive return of ~386.9% in the last six months. On the technical analysis front, the stock has a support level of ~$2.84 and resistance of ~5.06. On the valuation front, the stock is trading at a P/B multiple of 3.3x as compared to the industry median of 2.2x on TTM (Trailing Twelve Months) basis. Considering the spike in the stock price over the last six-month, and current trading levels, we are of the view that most of the positive factors have been discounted at current trading levels. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $4.82, up by ~30.27% on 28 December 2020.

GEVO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

GoPro, Inc. 

GPRO Details

GPRO Launches 'The Remote': GoPro, Inc. (NASDAQ: GPRO) is engaged in the manufacturing of mountable and wearable capture devices such as action cameras and related accessories. On December 17, 2020, the company announced that it is introducing 'The Remote’, the latest ruggedized, waterproof, Bluetooth® remote for HERO9 Black, HERO8 Black and MAX Cameras. 

GPRO Achieves Record Sales: In another update, the company surged in the holiday period with all-time elevated sales during the Black Friday-Cyber Monday phase. GPRO also achieved the desired subscription and sales milestone during this period, owing to the direct-to-consumer and subscription-centric strategy. The company expects to continue this growth momentum in 2021. GPRO lao unveiled that its subscriber count surged more than 670,000 mark during the end of November 2020, followed by robust online sales. It anticipates exceeding the goal of 700,000 subscribers by 2020 end.

3QFY20 Key Highlights: During the quarter, the company reported a non-GAAP net income of $31 million or 20 cents per share against a net loss of $61.3 million or a loss of 42 cents reported in the period corresponding period. Revenues during the period came in at $280.5 million, skyrocketing 113.9% year over year, owing to strong sales across all geographies and channels along with a higher subscriber base. Non-GAAP gross margin came in at 36.2%, up from 23.4% in pcp. The company exited the quarter with a cash balance of $146.9 million, and long-term debt amounted to $156.8 million.

3QFY20 Key Results (Source: Company Reports)

Outlook: For 4QFY20, the company expects revenues to be $365 million (+/- $10 million). Adjusted gross margins are expected to be 38% (+/- 50 basis points). Adjusted earnings for 4QFY20 is expected to be 37 cents (+/- 5 cents per share). For FY20, the company expects revenues to be $900 million (+/- $10 million).

Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of GPRO closed at $8.55 with a market capitalization of ~$1.29 billion as on 28 December 2020. The stock made a 52-week low and high of $2.00 and $9.17, respectively, and is currently trading close to its 52-week high level. The stock has delivered a positive return of ~82.1% in the last six months. On the technical analysis front, the stock has a support level of ~$6.3 and a resistance of ~$9.2. We have valued the stock using a P/CF multiple based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms). Considering the spike in the stock price over last six-month, valuation and current trading levels, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $8.55, up by 0.47% on 28 December 2020.

GPRO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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