Global Net-Zero Policies Will Expand Sustainable Aviation Fuel Markets

Key Takeaways

• Rapid scaling of carbon monetization, CDR credit sales, and SaaS solutions signals potential for much higher recurring, high-margin income than current expectations.
  
• Standardized plant designs and growing SAF demand enable accelerated geographic expansion, securing long-term market share in a favorable regulatory and industry environment.
  
• Heavy reliance on government incentives, high execution and financing risks, and a shrinking addressable market threaten profitability and long-term growth prospects.

Catalysts

Operates as a carbon abatement company.

• While analyst consensus expects up to $60 million of annual adjusted EBITDA from Gevo North Dakota via carbon abatement and 45Z tax credits, the company's unexpected speed in delivering positive net income and adjusted EBITDA signals that near-term EBITDA contribution and margin expansion could substantially exceed consensus, especially as carbon business and tax credit monetization scale faster than anticipated.
  
• Analysts broadly agree on $30 million per year in long-term carbon dioxide removal (CDR) credit sales from current volumes, yet Gevo's large-scale CCUS capacity, first-in-class PURO certification, and imminent third-party sequestration deals point toward a much larger and accelerating CDR revenue stream, with potential to deliver recurring, high-margin income well beyond current models as voluntary and compliance carbon markets expand.
  
• Gevo's modular ATJ30 and ATJ60 plant designs, now being rapidly standardized, unlock the prospect of rapid geographic scaling across more than 180 brownfield ethanol sites; this could trigger exponential increases in sustainable aviation fuel (SAF) production, securing long-term volume growth and market share as global SAF mandates and blending requirements ramp up.
  
• The Verity SaaS platform, already monetizing compliance and traceability for major partners like LANXESS and five ethanol plants, positions Gevo to capture recurring, software-based revenue at higher margins by becoming a mission-critical enabler for regenerative agriculture and carbon intensity tracking as industry-wide climate compliance requirements intensify.
  
• With the US shutting down refineries and jet fuel demand forecast to rise over two billion gallons yearly, Gevo's cost-competitive, low-carbon, domestically sourced SAF is poised to command price premiums and tap into a vast, reliable addressable market-driving robust, durable top-line revenue and margin growth as both industry and policy tailwinds accelerate.

Gevo Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Gevo compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Gevo's revenue will grow by 39.8% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Gevo will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Gevo's profit margin will increase from -72.8% to the average US Oil and Gas industry of 15.0% in 3 years.
• If Gevo's profit margin were to converge on the industry average, you could expect earnings to reach $32.9 million (and earnings per share of $0.14) by about August 2028, up from $-58.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 127.5x on those 2028 earnings, up from -6.5x today. This future PE is greater than the current PE for the US Oil and Gas industry at 12.9x.
• Analysts expect the number of shares outstanding to grow by 1.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.43%, as per the Simply Wall St company report.

Gevo Future Earnings Per Share Growth

Risks

• The long-term acceleration of electric vehicle adoption may structurally reduce demand for liquid biofuels and sustainable aviation fuels, which could shrink Gevo's future addressable market and put downward pressure on revenues as airlines and freight sectors transition to direct electrification or improved battery technologies.
  
• Execution risk remains high for Gevo's commercial plant rollouts, with acknowledged multi-year timelines and heavy dependency on securing external financing, particularly for large projects like ATJ60 that require over $1.6 billion and depend on regulatory and customer factors, creating long-term uncertainty in revenue realization and consistency in profitability.
  
• Gevo's reliance on government incentives such as clean fuel production tax credits and carbon dioxide removal markets exposes it to significant regulatory risk; with credits like 45Z scheduled to expire in 2029 and potential policy changes or retroactive law amendments, future net income and margins could be negatively impacted if incentives are reduced or eliminated.
  
• As seen historically and referenced in the text, high capital intensity, ongoing need for plant expansion, and external project financing may create ongoing share dilution risk, which would undermine per-share earnings growth even if company-wide EBITDA continues to expand.
  
• Gevo operates in an environment of volatile feedstock prices (such as corn), uncertain development in large-scale carbon credit markets, and increasing regulatory and ESG obligations; volatility in input costs and compliance expenses could pressure gross margins and delay sustained profitability over the long term.

Valuation

• The assumed bullish price target for Gevo is $14.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Gevo's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $14.0, and the most bearish reporting a price target of just $1.15.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $219.1 million, earnings will come to $32.9 million, and it would be trading on a PE ratio of 127.5x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $1.61, the bullish analyst price target of $14.0 is 88.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.