PEIX - Pacific Ethanol: Buy The Dip

• Shares on the retreat after rallying more than 3,000% from March lows on the combination of broader market weakness and a surprise equity offering.
• Company announces strategic shift from renewable fuels to specialty alcohols and essential ingredients after the COVID-19 pandemic caused demand for sanitizers and disinfectants to soar.
• Discussing the underwhelming terms of Monday's surprise equity offering, the company would have likely fared much better by simply selling more shares into the open market.
• Expect demand for the company's high-quality alcohol products to remain strong for the foreseeable future. Adjusted EBITDA should exceed $125 million next year.
• Buy with both hands going into the company's third quarter earnings release and conference call on November 9. At a very moderate 6x Enterprise Value/Adjusted FY2021 EBITDA ratio, the short-term price target for the shares calculates to $9.

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