No News is Good News?
Maxxwell A.R. is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Sustainable chemicals producer Amyris, Inc (NASDAQ: AMRS) gave a whole new meaning to “no news is good news” last week. Shares traded as high as $3.53 on Wednesday after the company announced that its renewable jet fuel would be used on a demonstration flight during the Rio+20 United Nations Conference on Sustainable Development. Investors were probably shocked to see any signs of life from the company, but in the end the flight is more symbolic than anything else. This isn’t news.
Ironically, I gave a brief description of Amyris’ renewable jet fuel patents in my recent analysis of a Sasol study on renewable and synthetic aviation fuels. It’s great that the company can make jet fuel, but that is not the market area to focus on if they want to become cash flow positive as soon as possible. Management knows this and is looking to sell farnesene as a high-value aromatic (specialty chemicals, specialty chemical additives, fragrances, etc.) – as soon as they coax their yeasts into behaving.
To put the insignificance of this development into perspective let’s consider Solazyme (NASDAQ: SZYM). The company has produced small quantities of fuels for its targeted applications and has demonstrated their successful use in Navy helicopters and ships, various aircraft, a Maersk cargo tanker (kind of), and commercial vehicles. Furthermore, Amyris has demonstrated its jet fuel in the past without much fanfare.
Rather than releasing an itchy trigger finger over a meaningless press release investors should wait to see a steady stream of progress at Amyris. The company started 2012 on the right foot by producing 900,000 L of farnesene in 1Q12 compared to 565,000 L in the previous quarter. But while that represents a nearly 60% increase QoQ it is only 36% of the yield (2.5 million L per facility per quarter) once promised to investors. In other words the company would need to improve production yield 30% every quarter for the next year. That may not be very likely, but we will wait to see what update (if any) is given by CEO John Melo on the next conference call.
Did you enjoy this post? Follow me on Twitter to keep up with my future posts on value opportunities, energy, and sustainable chemicals @BlacknGoldFool.
Make better investments with science.
BlacknGold owns 175 shares of AMYRIS INC COM. The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
