25% off Solazyme Shares

This tailored oils company took a beating over the past month but still appears on track for growth.

Apr 9, 2014 at 5:08PM

Since their March peak of $15, Solazyme (NASDAQ:SZYM) shares are off more than 25% from a new share offering and a broad sell-off in tech and growth stocks. But with the catalysts for Solazyme in 2014, this sell-off looks like an excellent buying opportunity for long-term investors.

Share offering
Kicking off Solazyme's big drop was the announcement that the company would offer 5 million new shares and $130 million of convertible notes. The market took a while to digest the news, seeing shares off only a few percent initially but taking a double-digit percentage loss by the end of trading.

The offering will result in an additional 5 million common shares and the potential for about 10 million more if the convertible notes are converted to common shares. In total, this means around 15 million additional common shares. With about 75 million shares outstanding, this offering could result in the share count increasing by 20%.

Depending on whether the overallotments are exercised, Solazyme expects to raise somewhere between $176 million and $203 million. While shareholders never like dilution, this additional cash should help Solazyme in its expansion. With the company planning major capacity growth over the next few years as it ramps up production, having this extra cash around provides more security for Solazyme going forward.

Tech and growth panic
Since March, there has been a broader market movement against technology and growth stocks. Some have attributed this to overvaluation, a near-term correction, or big money taking a more cautious stance on markets and moving toward less risky investments. No matter why tech and growth stocks are lower, the Nasdaq is off over 5% from its highs, and higher growth plays have suffered the most.

Solazyme has been an easy target for the sell-off since the company is both losing money and has exposure to an industry where a major player is having financial difficulties. On the financials front, Solazyme is losing money because it's investing heavily in building facilities to ramp up production. Doing so is necessary to the company's plans to scale its technology.

Although Solazyme is targeting specialty chemicals rather than biofuels right now, the market can't help but compare Solazyme to biofuel companies. Surviving in the biofuel industry has been difficult with many high profile names trading well below their initial offering prices as losses continue for many biofuel producers. Since there are few other companies to compare Solazyme to, the comparison to biofuel companies is most often used and it lumps Solazyme into an industry Wall Street is more skeptical of.

2014 catalysts
This year marks the beginning of Solazyme's production-scaling plan. Shares were driven higher earlier this year when the company announced production of its algae oils at its Clinton, Iowa, facility. As the year progresses, Solazyme expects to increase production levels at that facility.

But the company is also looking toward Brazil for another production facility. Solazyme has been working on its Moema, Brazil, facility for years in both logistics and financing. This year, Solazyme nears completion of and may start production at the Moema facility. With a 100,000 MT capacity, the facility would provide a major boost to Solazyme's production.

Shares on sale
A share offering and a sell-off in tech and growth stocks have hit Solazyme shares hard since mid-March, making shares cheaper for investors wanting to build or increase their position. Solazyme's growth plans remain intact and the company has already demonstrated the beginning of production at its Iowa facility.

Through 2014, investors should look for a ramp-up in production and for the markets to realize the difference between Solazyme's tailored oils and unstable biofuel companies. I will continue to hold my shares of Solazyme and may add more if the price goes lower. Investors looking for a unique growth company coming off a rough month of share-price performance should have a look at Solazyme.

Six stocks that could outgrow Solazyme
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Alexander MacLennan owns shares of Solazyme. The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers