Why Solazyme Rocked This Week

Solazyme (NASDAQ: SZYM  ) was up 11% for the week, so far. And it's up an additional 12% just today. The company makes oils, using sugars and algae; these oils could transform the ingredients we use for transportation, cosmetics, and even food. The company is up after announcing that it has reached commercial-scale production at an Archer-Daniels-Midland (NYSE: ADM  ) plant in Iowa.

This small-cap and recent IPO has a lot of potential, though it's down a lot since it went public. So far, it has relied on partnerships for developing its products;  it has one in place with Chevron (NYSE: CVX  ) , for example, to jointly research alternative energy possibilities. And it continues to receive development revenue from Dow Chemical (NYSE: DOW  ) and Unilever (NYSE: UL  ) . This news shows that it's evolving into a real business.

This is a complex company to analyze, and its costs are currently outstripping its revenue growth. It also faces intense competition from well-capitalized oil companies that are investing in alternative energy. This is a very risky investment. So far, though, management appears to be taking the right steps to build the business.

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