What Fueled Solazyme's Wild Moves in 2012?
Jul 9th 2012 12:19PM
Updated Jul 10th 2012 3:50PM
The first half of 2012 is in the rearview mirror, and investors are gearing up for what looks to be an action-packed ending. There are bound to be some big winners -- and more than a few duds -- no matter what happens in the United States and abroad.
Will your favorite stock have its victory lap as we hit the home stretch, or will it get lapped? First-half performances can hold some clues, so let's look to the recent past to find out whether Solazyme (NAS: SZYM) deserves a place in your portfolio going forward.
Solazyme has had quite the ride in 2012. It started the year on a high note, but that didn't last. Fortunately for shareholders, the stock clawed its way back to positive territory, and it holds a slim gain for the first half of the year:
Here are a few key metric regarding its recent performance:
|Market Cap||$775.3 million|
|TTM Revenue||$45 million|
|TTM Net Loss||($63 million)|
|TTM Free Cash Flow||($58 million)|
|MRQ Revenue||$14 million|
|MRQ Net Loss||($17 million)|
|MRQ Free Cash Flow||($23 million)|
|MRQ Revenue/Net Income Year-Over-Year Change||75%/(142.9%)|
|Motley Fool CAPS Rating (out of 5)||***|
Source: Morningstar. TTM = trailing-12-month. MRQ = most recent quarterly.
What the numbers don't tell you
Solazyme started the year on an upward trajectory after finalizing a year-end biofuel supply contract with the U.S. Navy. The cost of that fuel, many times more per gallon than normal petroleum-based fuels, did not go unnoticed, but the contract still represented a turning point for Solazyme. The small biofuel producer has also partnered with Chevron (NYS: CVX) and supplied fuel for a test airline flight.
However, like many other biofuel producers, notably Amyris (NAS: AMRS) , Solazyme has found difficulty in scaling up its biofuel production operations. KiOR (NAS: KIOR) completed its first plant in Columbus, Miss., but the plant has not yet produced anything commercial. That's led Solazyme toward other applications for its microalgae production process, particularly renewable oils for nutritional and cosmetic use. The company's stock soared after announcing plans to build a Brazilian plant for such oils. That's been Solazyme's peak so far this year. What happened since?
Not much, really. As an early stage company, Solazyme may be years away from meeting its potential. The only notable performer in the biofuels segment thus far has been Rentech (NYS: RTK) , and that company has substantial fertilizer interests keeping it profitable. In the meantime, Solazyme's been bleeding cash as it tries to scale up, and both revenue and net income took a turn for the worse in its most recent quarter.
The Fool's analysts have taken both bullish and bearish stances on Solazyme this year. Fellow Fool Neha Chamaria reiterated the "diversified renewables" argument that Fool contributor Brian Stoffel has presented since last year. Fool analysts John Reeves and David Meier also bought Solazyme for their real-money portfolio last month on the basis of these arguments. Fool analyst Alyce Lomax agrees, and was the first to give Solazyme a place in her real-money portfolio, but she also recognizes the potential political pitfalls of owning an alternative energy stock in the age of Solyndra scandals.
On the other hand, I and my fellow Fool Travis Hoium have both pointed out that biofuels have a long, troubled history with no evidence of real success. He notes that scale in biofuels will be exceedingly difficult to achieve, and that consumer products might save these companies from themselves. Other analysts have also taken bearish stances, and one recent downgrade sent the stock plummeting.
Going forward, investors should look for successful Solazyme product rollouts on store shelves as well as new biofuel developments. Much of this stock's movement may seem arbitrary for the rest of 2012, as there isn't much yet to latch onto. Both positive and negative news (as well as speculation) can easily cause wild moves in Solazyme's stock price.
Solazyme's future may depend on the upcoming elections. There are many other companies that could have huge swings after all the votes are cast, and The Motley Fool's got a list of several in the right position to profit. Find out more in our latest free report: "The Stocks That Could Skyrocket After the 2012 Election." Don't wait until November for this information -- claim your free copy of this important report now.
At the time this article was published Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights.The Motley Fool owns shares of Solazyme. Motley Fool newsletter services have recommended buying shares of Chevron. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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