Ethanol producer VeraSun fall after upgrade

In Friday trading those costs climbed to a record $7.96 a bushel.

The ascent to that level has hammered VeraSun's share price: Since the stock's Dec. 21, 2007, closing price of $17.75, shares have fallen 75 percent to Tuesday's closing price of $4.48.

Oppenheimer & Co. analyst Joseph Gomes Jr., writing in a client note about the company's tumbling share price, said enough is enough.

"While the Iowa floods drove corn prices to unprecedented heights, equally important, in our opinion, spot ethanol prices rose," he wrote. "Ethanol producers can still be profitable at higher corn prices, if the price for the end product also rises."

VeraSun had locked in part of its corn costs for the second quarter prior to the sharp price jump, he said, adding that the company should benefit from selling ethanol into a higher-priced spot market.

The analyst also said VeraSun's decision to not start about 330 million gallons per year of new capacity will support ethanol prices and tap down demand for corn, thus easing costs for the entire sector.

As a result, Gomes raised his rating on VeraSun shares to "Outperform" from "Perform" and put a $6 price target on the stock.

Shares climbed as high as $4.91 Wednesday before retreating, falling 2 cents to close at $4.46.