Biofuels stock Solazyme (NASDAQ:TVIA) has gotten really beaten down over the last year. Stocks do all kinds of things for all kinds of reasons -- and stock moves are all too frequently anything but logical -- but it seems like for this green company's shares, it's been mostly downhill lately despite sunny tidings.
Granted, Solazyme isn't a profitable company yet. That's not surprising and certainly not news; it's been busy creating alternative oil using plant-based sugars and algae. In its recent third-quarter report, Solazyme posted a net loss of $22.5 million, wider that the $14.1 million net loss it reported in the comparable quarter last year. Revenue dipped to $8.6 million from $8.9 million the year before.
What is surprising is how much good news investors seem to have brutally overlooked. For example, Solzayme announced strategic collaboration, marketing, and manufacturing agreements with Archer Daniels Midland (NYSE:ADM). Its joint venture with a unit of Bunge Limited (NYSE:BG) is expanding, with a goal to increase its production capacity to 300,000 metric tons by 2016; it's also embarking on the development of tailored food oils in Brazil.
Meanwhile, despite the fact that biofuels are hardly mainstream, sales of Solazyme's Algenist skin care line have doubled year-to-date to $12 million. It's nice to have a marketable product -- not to mention an ancillary source of revenue -- right off the bat.
It's not easy being green
I started out calling Solazyme a "biofuels" stock, and a "green" company, but that may be exactly the key to the reality disconnect about this stock. What many investors may be missing is how much growth Solazyme can garner from other avenues such as Algenist and other personal care products, as well as food and confectionary oils.
Some companies that are considered peers, like Amyris (NASDAQ:AMRS) and Gevo (NASDAQ: GEVO), are having major problems transitioning from biofuel start-ups to commercial enterprises that can make money. Both companies have recently had difficulties with production and, of course, have experienced stock price drubbings.
Although Amyris, which is partly owned by oil giant Total (NYSE:TTE), reported a narrower loss last quarter, its revenue plunged 47% to $19.1 million; it had to close two of its three plants when it encountered difficulties with fermentation yields. Gevo's even scarier; last quarter, its revenue dropped to just $600,000 from $17.5 million the year before.
I'm glad to have a stake in Solazyme as opposed to many companies that are considered "comparable." Solazyme's simply way ahead of the crowd.
There's other positive news that hasn't seemed to make a dent in current bearishness. The U.S. Senate recently rejected restrictions in its defense policy that would have limited the military's role in the development and purchase of biofuels for jet and warplanes.
Another positive development is Solazyme's testing of "Soladiesel" for normal consumer vehicles at four spots in the San Francisco area. The experiment is in partnership with Propel Fuels, which builds "Clean Fuel Points" in traditional gas stations according to green specs, and will last for one month. The fuel is 20% algal and 80% petroleum.
Patience is the key
Solazyme remains risky in the grand scheme of things, but it's less risky than many of the other alternative energy and biofuel plays. Solazyme's also got a heck of a lot of first-mover advantage given its long-running relationships with the military and other important partners.
I bought shares of Solazyme for the Prosocial Portfolio I'm managing for Fool.com not once but twice, putting some clean energy into the socially responsible collection of stocks I've been building. I've also bought into Solazyme personally.
So far, Solazyme's stock performance could be called disappointing by some. No matter: I have high hopes for Solazyme's continued progress in the future. It remains an important, innovative company that's looking to the future, and even if many investors are unimpressed right now, I still believe patience will pay off for those of us who are willing to give it time.