Action Call: Buy PEIX (12/16/2020)

December 16, 2020


Pacific Ethanol, Inc. (PEIX)




12 Month Price Target, $9.40
Price as of 12/16/20, $6.02


Pacific Ethanol, Inc. produces and markets low-carbon renewable fuels and alcohol products in the United States. The company operates in two segments, Production and Marketing. It produces and markets ethanol; and co-products, such as wet and dry distillers grains, wet and dry corn gluten feed, condensed distillers solubles, corn gluten meal, corn germ, corn oil, dried yeast, and CO2, as well as markets ethanol produced by third parties. Pacific Ethanol, Inc. was founded in 2003 and is headquartered in Sacramento, California. As the Corona virus resurgence continues into the winter and beyond, the demand for hand sanitizer and disinfectants will remain strong. Therefore, we believe PEIX is an attractive investment because:

1. PEIX is transforming from an ethanol-based business to a specialty alcohol producer. In 2019, specialty alcohol contributed 11% to PEIX’s total sales. For the first nine months of 2020, specialty alcohol has contributed 45% to total sales. With Essential Ingredients and Other segments remaining at similar contribution levels from 2019 to 2020, the 34% increase in sales of Specialty Alcohol has been mainly taken from a reduction in sales of ethanol, reducing the company’s exposure to fuel-grade ethanol markets that have experienced inventory over-supply challenges and demand destruction. The majority of PEIX’s specialty alcohol production is already contracted at fixed prices for oneyear or more.

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