What happened
Investors in ethanol producer Pacific Ethanol (NASDAQ: PEIX) are having a terrific year. Since 2020 started -- and the COVID-19 crisis with it -- the company has evolved beautifully from a producer of unprofitable gasoline additives into a producer of very profitable hand sanitizer and disinfectant active ingredients.
It's still producing alcohol, mind you. It's just that now it's making money doing that -- and Pacific Ethanol's stock price is up more than 10 times in value as a result.
Image source: Getty Images.
So what
Its shares are going on another little tear this afternoon, as the stock price has risen 13.6% through 12:30 p.m. EDT in response to a price target hike from an analyst at investment bank Craig-Hallum.
As TheFly.com reports today, the analyst hiked the firm's price target from $9 a share to $13 on the conviction that the shift in Pacific Ethanol's business model is both high quality and "mostly being missed by investors."
Now what
Craig-Hallum sees a wide range of valuations for Pacific Ethanol going forward as it capitalizes on its position as a premium producer of USP-grade alcohol. In a bull case scenario in which Americans continue to see a heightened need for disinfectants, the analyst sees the potential for Pacific Ethanol shares to rise as high as $20 a share, nearly three times where they trade today.
More muted assumptions -- say, profit margins getting cut as more competitors join in producing this commodity product -- imply lower valuations. Still, worst case, the analyst sees Pacific Ethanol as worth no less than $8 a share, which is still more than the stock costs, even after today's run-up.
10 stocks we like better than Pacific Ethanol
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Pacific Ethanol wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Â
*Stock Advisor returns as of September 24, 2020
Â
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
