Ceres, Inc (NASDAQ: CERE)
Ceres, Inc. is an agricultural biotech company based in California. The company develops and sells energy crops to produce renewable bioenergy feedstock in the United States and North America. The company’s customers include ethanol mills, utilities, power producers and agri-industrial firms. The company has a market cap of less than $15 million, yet insiders and institutions make up for just over 50% of the company’s ownership. The company also has $9 million in cash and virtually no debt- unlike other companies of this size, Ceres seems to have proven itself recently when it was awarded what could turn out to be a very important patent.
On August 12 Ceres announced the company received a patent for its iCODE multi-gene trait development system. iCODE was developed to evaluate and select the optimal combinations of genes and control their components for next generation biotechnology traits. That means crops such as soybean and corn can be enhanced through Ceres’ technology to yield stronger, healthier crops. One of the takeaways from a recent company statement was that iCODE could help smaller research companies develop “new discoveries and allow even smaller research programs to better compete against much larger competitors. Well, when we think of larger competitors or “much larger” competitors in the Ag space, names like Monsanto come to mind. As such, if a small company like Ceres owns a patent for a technology that significantly enhances crops, we don’t think they’ll remain a small company much longer.
Ceres’ CEO, Richard Hamilton had this to say:
“Seed and trait companies rely on intellectual property protection, and iCODE could play a key role for companies attempting to access this new IP landscape,” Ceres President and CEO Richard Hamilton said in a statement. “The first to unlock the potential will have a significant advantage in this area.”
CERE Price Action
The stock popped yesterday on the patent announcement, gapping up from $1 and hitting a high of $4.50. Price settled at the close at $2.00 for a 100% gain. Like most in play stocks, sellers will come out to short on technical and that’s just what they did. However, Ceres has tangible news that could meaningfully impact the company’s prospects moving forward. As such, any sort of gap fill with accumulation under the $2 mark would potentially be a good entry point. On the other hand, buyers may come right back today and bid up the price again, you never know. What we do know is that this is “real news” for Ceres, and with a tiny market cap and $1.50 of the share price in cash, the company will not need to dilute any time soon. We also note that a bulge bracket firm, Barclays, has coverage on the stock with a price target of $5; the prior price target was $9. Lastly, several years ago the stock sported a price of well over $100 per share. Expect more news from the company in the months ahead and keep Ceres on your radar.