Please ensure Javascript is enabled for purposes of website accessibility

Why Pacific Ethanol Stock Climbed 15% on Wednesday Morning

By Rich Smith - Updated Sep 16, 2020 at 10:46AM

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

One analyst just quintupled its price target on the ethanol stock.

What happened

Shares of ethanol producer Pacific Ethanol (ALTO 2.86%) leapt out of the gate this morning and were up a strong 15% at 11:15 a.m. EDT. You can almost certainly thank the friendly analysts at H.C. Wainwright for that.

So what

This morning, Wainwright issued a new price target for Pacific Ethanol, a money-losing fuel-additives stock that the analyst had previously valued at a tiny $3 a share. But in a report covered by, Wainwright says the stock is now worth more than five times that at $16.

Credit COVID-19 for the change. Last quarter, as demand for ethanol to use in disinfectants and hand sanitizers exploded, Pacific Ethanol reported its first quarterly profit in 3 1/2 years. Wainwright calls the shift from producing ethanol to blend with gasoline, to producing ethanol to kill germs a significant strategy move for the company, and expects Pacific Ethanol to devote roughly one-fifth of future production to this new purpose.

Woman dispenses hand sanitizer from a bottle

Image source: Getty Images.

Now what

The new and improved business model transforms Pacific Ethanol from a company destined to produce losses ad infinitum, into one with a good chance of posting profitable growth for years to come, and Wainwright isn't alone in holding this view.

According to the latest S&P Global Market Intelligence tally, analysts on average predict that 2020 will see the company report its first full-year profit since 2016. And profits could grow more than 350% next year, to as much as $1.18 per share. At barely $5.50 a share today, that makes Pacific Ethanol a bargain.

Rich Smith 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.
$5.04 (2.86%) $0.14

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

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.