Vertex Energy, Inc. (NASDAQ:VTNR) stock swelled by 339% on Friday. A 5-star analyst, Amit Dayal of H.C. Wainwright, reiterated a “Buy” rating on this stock, and the price target has soared from $4 to $25. What is the ballyhoo about VTNR stock anyway? The company has recently announced a buyout of the Alabama refinery of Shell’s Mobile in a deal worth $75 million. This deal is expected to be finalized by Q4-2021.
Vertex targets renewable energy
Renewable diesel is what Vertex Energy is targeting in the coming months, for which it intends to invest as much as $85 million. Vertex aims to transform the hydrocracking unit of the acquired facility into renewable diesel production capacity with the investment. The target for this transformation is 2022 end, which will start fetching monetary results in terms of $3 billion revenue and $400 million gross profit by 2023. Apart from that, Vertex also aims at producing petroleum fuel at this facility.
Vertex-Shell deal also includes buying co-related hydrocarbon inventory, logistics infrastructure, crude oil of over 3 million barrels, and product storage.
Positioning as a unique energy evolution player
The 90,000 barrel-per-day (bpd) Alabama refinery will position VTNR as the unique energy evolution player in the market. The investors are eyeing the deal to extract benefits through the rising demand for renewable diesel. Other benefits for investors in this deal include potential improvement, price stability, and artificial supply constraints, which certain regulations would impose on conservative energy products.
This is seen as a favorable move by analysts who look at the deal for VTNR as a way to zoom in 2-3 years ahead in competition at comparatively lesser CAPEX. For the same years, Vertex will be seen harvesting above its average margins. Over the coming months, VTNR shares are speculated to add as much as 73% muscle. Another analyst that is following the stock also has a “Buy” rating on Vertex. This stock’s average price target is $13.5, while its consensus rating is “Moderate Buy.”