Please ensure Javascript is enabled for purposes of website accessibility

Why Vertex Energy Stock Is Skyrocketing Today

By Matthew DiLallo - May 28, 2021 at 10:04AM

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

An analyst is really bullish on the energy company's growth potential.

What happened

Vertex Energy's (VTNR 3.55%) stock price soared more than 48% by 10:30 a.m. EDT on Friday. Fueling the oil stock was a significant price target increase by an analyst following the company's purchase of a refinery from Royal Dutch Shell (RDS.A) (RDS.B)

So what

Vertex Energy agreed to buy the Mobile refinery in Alabama from Shell for $75 million on Wednesday. It marked the "largest, most significant transaction ever completed by Vertex, one that positions us to become a leading regional supplier of both renewable and conventional products," according to comments by CEO Benjamin Cowart in the deal announcement. The company noted that upon completing an $85 million conversion of the facility's hydrocracking unit by the end of next year to produce renewable diesel, the refinery could generate $3 billion in revenue and $400 million in gross profit in 2023. 

Two people look at plans at a refinery at night.

Image source: Getty Images.

That deal led an analyst from H.C. Wainwright to set a $25 price target on Vertex Energy stock. That's more than six times yesterday's closing price. Fueling that big boost in the price target was the "transformational" refining deal. That transaction led the analyst to boost Vertex's 2023 revenue estimate from $246 million to $2.9 billion. The analyst now sees Vertex Energy generating $319.7 million in adjusted EBITDA that year, a more than 10 times improvement over the next two years from the current level. 

Now what

Vertex Energy has a bold vision for Shell's Mobile refinery. It aims to diversify the site to produce a range of refined products, including renewable diesel, to support the energy transition to low-carbon alternatives. If successful, the transformation transaction could generate significant earnings growth for the company.

Matthew DiLallo 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

Vertex Energy, Inc. Stock Quote
Vertex Energy, Inc.
$7.30 (3.55%) $0.25
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc
Royal Dutch Shell plc Stock Quote
Royal Dutch Shell plc

*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.