GrowGeneration stock is a name that we’ve been covering here at Insider Financial since 2017. For the past three years, the stock has been range-bound and not widely followed until this summer. After a blowout quarter and an appearance on Jim Cramer’s Mad Money, Robinhooders piled into the stock and we finally got the breakout we have been looking for. Now, many of our readers and subscribers are emailing us asking if GrowGeneration stock can keep rising. In this article, we take a look.
First up, here’s a little background info for those not familiar with GrowGeneration stock.
GrowGen owns and operates specialty retail hydroponic and organic gardening stores. Currently, GrowGen has 28 stores, which include 5 locations in Colorado, 6 locations in California, 2 locations in Nevada, 1 location in Washington, 4 locations in Michigan, 1 location in Rhode Island, 4 locations in Oklahoma, 1 location in Oregon, 3 locations in Maine and 1 location in Florida. GrowGen also operates an online superstore for cultivators.
GrowGeneration stock carries and sells thousands of products, including organic nutrients and soils, advanced lighting technology and state of the art hydroponic equipment to be used indoors and outdoors by commercial and home growers. Its mission is to own and operate GrowGeneration branded stores in all the major states in the US and Canada.
Management estimates that roughly 1,000 hydroponic stores are in operation in the US. By 2025, the global hydroponics system market is estimated to reach approximately $16 billion.
Blowout Q2 Numbers
What got the market excited in GrowGeneration stock was the huge numbers the company reported in Q2. Further fueling the rally was its outlook was even better.
GrowGen reported record revenues of $43.5 million and adjusted EBITDA of $4.6 million for Q2 2020. Q2 2020 was the Company’s 10th consecutive quarter of record revenues. The Company also reported record GAAP net income of approximately $2.6 million for Q2 2020 compared to net income of $1.1 Million for Q2 2019.
The company raised 2020 revenue guidance to $170M–$175M and Adjusted EBITDA to $17.0M–$18.0M. Revenue guidance for 2021 is $245M–$260M. Adjusted EBITDA guidance for 2021 is $26M–$28M.
Here are the highlights:
- Revenues up 123% to $43.5 million for Q2 2020 vs $19.5 million for Q2 2019
- Same-store sales were $25.1 million for Q2 2020 vs $16.9 million for Q2 2019, a 49% increase
- Adjusted EBITDA of $4.6 million for Q2 2020 vs $1.7 million for Q2 2019, an increase of 166%, $.12 per share, basic
- Gross profit margin % for Q2 2020 was 26.7% vs 29.9% for Q2 2020
- Gross profit was $11.6 million for Q2 2020 vs $5.8 million for Q2 2019, an increase of 99%
- Store operating costs as a percentage of sales were 9.2% for Q2 2020 vs 14% for Q2 2019, a decrease of 34%
- Income from store operations was $7.6 million for Q2 2020 vs $3.1 million for Q2 2019, an increase of 146%
- Income from store operations as a percentage of revenue was 17.5% for Q2 2020 vs 15.8% for Q2 2019
- Corp Payroll and G&A as a percentage of revenue was 7.2% for Q2 2020 vs 7% for Q2 2019
- GAAP net income per share, basic, was $.07 for Q2 2020 vs $.04 for Q2 2019
- GAAP net income was $2.6 million for Q2 2020 vs net income of $1.1 million for Q2 2019 2020
Reasons To Be Bullish On GrowGeneration Stock
Besides the blowout quarter and raised outlook, there are a number of reasons to be bullish on GrowGeneration stock going forward.
- The Democrats will likely sweep in the November elections and that will open up legalization in the U.S.
- Seven states have cannabis on the ballot in November. This benefits GrowGen.
- GrowGen is a pick-and-shovel play for cannabis just like Home Depot, Lowe’s, and Tractor Supply are for contractors and farmers.
- GrowGen has already completed a $48 million raise, so dilution is not a concern.
- Shorts have been piling in, which will further fuel rallies as they are forced to cover.
- GrowGen has only 28 stores with plans to have a total of 51 by next year. The company is looking to double its footprint in just one year. It’s very difficult to find ANY stock with this much potential.
- GrowGen is focused solely on the U.S.
- While it took a while for the breakout to happen, GrowGen has not made bagholders out of its stock like Canopy, Tilray, Aurora Cannabis, and most of the cannabis stocks out there.
These are just eight reasons to be bullish on GrowGeneration stock. The company has momentum and a long runway for growth. It is the market leader when it comes to supplying the cannabis sector with everything required to set up a grow operation. As more states legalize and if federal legalization happens, GrowGeneration stock will be a triple-digit runner. While there will be dips along the way, opportunistic investors should use any dips as an opportunity to increase exposure to a company with enormous potential. It’s not often investors get an opportunity to get in on a Home Depot or Lowe’s in the early stages.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:GRWG or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.
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