Please ensure Javascript is enabled for purposes of website accessibility

Why Vertex Energy Stock Rocketed 34% at the Open Today

By Reuben Gregg Brewer - Jun 1, 2021 at 10:51AM

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

Shares of the energy company took off as industry watchers reevaluated the company after it announced a big deal.

What happened

Shares of Vertex Energy (VTNR -11.10%) rose in dramatic fashion on Tuesday, gaining as much as 34% in early trading. Although the stock quickly gave back some of that gain, by 10:46 a.m. EDT, it was still up by 22% or so. The reason for the advance was a combination of recent news and an analyst's reevaluation of the company's future based on that news.

So what

On May 26, Vertex -- one of the largest processors of used motor oil in the United States -- agreed to buy a refinery in Mobile, Alabama, from Royal Dutch Shell. The following day, the stock rallied on that news, as it represents a material growth opportunity for Vertex. Two days later, an H.C. Wainright analyst upgraded the stock, and the shares rallied again

Four people in protective gear in an energy processing facility.

Image source: Getty Images.

On Tuesday, yet another analyst came out with an upgrade, pushing the shares even higher. Given that the stock has advanced by a massive 400% or so since the refinery purchase was announced, the current rally is clearly related to excitement surrounding this news. And the business opportunity for Vertex could be material, given that this morning, Stifel increased its price target on the stock from $2 to $17. It has a buy rating on the name.

The big story is that converting this refinery to produce renewable fuels will likely be cheaper than building a new refinery from the ground up. And that will position Vertex to prosper as the world shifts toward cleaner energy alternatives. It's worth noting that the upgrade at the end of last week from H.C. Wainright was even larger, taking the target price from $4 to $25, with a buy rating.   

Now what

Clearly, investors' emotions are running high with regard to Vertex, though it should be noted that the energy sector has broadly benefited Tuesday from rising oil prices. Still, after such a large run-up in the share price over the last few days, long-term investors should probably tread with caution here. In fact, the swift pullback that followed Tuesday's early spike suggests that animal spirits may have priced in a bit too much good news, given that the benefit of the acquisition will take time to play out. Indeed, even after Vertex closes on the facility purchase (hopefully, later this year), it will still have to invest time and money in it before the facility will be able to produce the cleaner energy options that have investors so excited. 

Reuben Gregg Brewer 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.
$7.05 (-11.10%) $0.88

*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 08/12/2022.

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.