Please ensure Javascript is enabled for purposes of website accessibility

Why Pacific Ethanol's Shares Jumped and Then Slumped on Friday

By Travis Hoium – Sep 11, 2020 at 4:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Volatility is back for this ethanol stock.

What happened 

Shares of Pacific Ethanol (ALTO -4.41%) were up by as much as 11.1% in early trading Friday, continuing a great week for the stock. But most of those gains didn't last long, and by the close of the trading day, the stock was up by just 1.1%. 

So what

Pacific Ethanol's stock has been on an incredible hot streak since investors learned that the company would be surprisingly profitable in 2020. It has shifted production away from ethanol to the high-grade alcohol that is in greater demand for cleaners and hand sanitizers during the pandemic. As a result of the windfall that has resulted from that move, management now expects adjusted EBITDA of between $50 million and $70 million this year, with "momentum continuing into 2021."

Corn ethanol in test tubes.

Image source: Getty Images.

Now what

Given the sharp rise in its share price and uncertainty about how long the current demand levels will last, we can expect some volatility from Pacific Ethanol's shares. That's what I'll chalk Friday's moves up to, because there wasn't any real news out of the company or the industry that could have driven the rise or the fall back to nearly flat. But keep a close eye on its earnings over the next few months, because the high demand for sanitizers and disinfectants probably won't last forever. 

Travis Hoium 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alto Ingredients, Inc. Stock Quote
Alto Ingredients, Inc.
ALTO
$3.47 (-4.41%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.