Solazyme (NASDAQ:SZYM) Pops on Deal with Dow

Modern Energy Roundup - May 2, 2012

Written by Green Chip Stocks
Posted May 2, 2012 at 1:24PM

Solazyme, Inc. (NASDAQ:SZYM) announced this morning that it and the Dow Chemical Company (NYSE:DOW) have entered into an offtake agreement that allows Dow to purchase all of Solazyme's non-vegetable microbe-based oils for use in dielectric fluid applications. The length of this deal runs through 2015.

Solazyme and Dow have also entered into a multi-year extension of a current joint development deal that allows Dow to provide additional development work on Solazyme's tailored algal oils. Solazyme is up about 5% in premarket.

As I've mentioned in the past, I'm not really a fan of biofuels – both as an investment and as a serious contributor to our energy and climate problems. It's definitely one tool in the shed, but it's not going to give us the most bang for our buck. That being said, Solazyme is one of the few biofuel players that I believe will still be around three years from now. It's partnership with Chevron and its ability to generate a few bucks in the food and cosmetics space gives it a little more flexibility than most of its competitors.

Last month, Solazyme hit my initial price target of $16. At which time, most who held out for that target, took their winnings and moved on. Right now, the stock is trading around $11.35. Although today's announcement could offer some support, I'm hesitant about re-visiting this one at these levels.

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