What happened
After dipping a bit on Friday, shares of alcohol-producer Pacific Ethanol (PEIX +1.81%) are back on a tear this week, rising first 30% in Monday trading and now another 16.5% today. Through 11:45 a.m. EDT, the stock has gained more than 48% in less than 48 hours of trading!
Why are Nasdaq investors all hot and bothered over this coronavirus stock this week?
Image source: Getty Images.
So what
The answer? Because Pacific Ethanol is a coronavirus stock.
While the company has historically been viewed (and rightly so) as a fuel-additive maker, producing ethanol to be mixed with gasoline for fueling cars, Pacific Ethanol has come into its own as a producer of in-demand alcohol for disinfectants and hand sanitizers in recent months. Thus, even as revenue declined last quarter, the profitability of that revenue increased dramatically -- enabling Pacific Ethanol to deliver its first quarterly profit in 3 1/2 years.
Now what
This week, investors are betting that this is the beginning of a new trend -- a new business model for Pacific Ethanol, in which its signature product (ethanol) is sold as a high margin weapon for combating coronavirus, rather than as a low-margin alternative to gasoline.
Whether that's the right bet to make will depend on how long the coronavirus poses a threat. I'm betting that it (or diseases like it) are going to pose a threat for a very long time -- and Pacific Ethanol investors seem to agree.
