GrowGeneration Corp: Undervalued Pot Stock Expected to Soar in 2022

Why GrowGeneration Stock Could Triple in 2022

After an abysmal 2021 for cannabis stocks, it’s not difficult to find some of them trading at multi-year lows. One marijuana stock that has taken an unexpected hit but could be a big winner in 2022 is GrowGeneration Corp (NASDAQ:GRWG).

GRWG stock had a terrible 2021. As of this writing, GrowGeneration stock is down by:

  • 16% month-over-month
  • 45% over the last three months
  • 74% over the last six months
  • 68% year-over-year

Trading around $12.80, GRWG stock is at its lowest level since August 2020. Grizzly, but according to Wall Street, it’s a screaming deal.

Of the analysts following GrowGeneration Corp, their average 12-month target is $31.00, with a high estimate of $44.00. That points to upside of 141% and 242%, respectively. Even their low estimate of $18.00 points to potential gains of 40%.

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Few cannabis companies had a better year than GrowGeneration Corp. It reported record first-quarter, second-quarter, and third-quarter financial results.

Yet, despite the company’s record-setting numbers, investors sent GrowGeneration stock into a tailspin.

About GRWG Stock

GrowGeneration is the largest provider of hydroponic supplies in the U.S., with 62 retail and distribution centers across 13 states. It also operates an online superstore. (Source: “GrowGeneration Acquires Mobile Media Inc. and MMI Agriculture,” GrowGeneration Corp, January 4, 2022.)

The company sells thousands of products, including organic nutrients and soils, advanced lighting, and state-of-the-art hydroponic equipment used by commercial and home growers. Among the items it sells are private-label products. (Source: “Investor Presentation,” GrowGeneration Corp, August 12, 2021.)

The company expects to open 15 to 20 more locations in 2022. (Source: “GrowGeneration Reports Record Third Quarter 2021 Financial Results,” GrowGeneration Corp, November 11, 2021.)

Another Strategic Acquisition

In addition to opening its own stores, GrowGeneration has an aggressive acquisition strategy.

To kick off 2022, GrowGeneration announced that it had acquired the assets of Mobile Media, Inc and MMI Agriculture Solutions (an Ellenville, NY-based mobile shelving manufacturing and warehouse facility) for $9.4 million in cash and stock. (Source: “GrowGeneration Acquires Mobile Media Inc. and MMI Agriculture,” GrowGeneration Corp, January 4, 2022.)

In 2021, MMI Agriculture Solutions generated over $14.0 million in revenue.

“This key strategic acquisition is especially important, as we expand in newly legalizing East Coast states like New York, New Jersey, Pennsylvania, and the New England states Maine, Massachusetts, Connecticut, and Vermont, where indoor vertical growing will be the method of growing,” said Michael Salaman, GrowGeneration Corp’s president and co-founder. (Source: Ibid.)

Another Record Quarter

GrowGeneration continued its winning ways in the third quarter of 2021, with its revenue advancing 111% year-over-year to a record $116.0 million. Its comparable-store sales increased by 15.7%. (Source: GrowGeneration Corp, November 11, 2021, op. cit.)

The company’s third-quarter 2021 net income went up by 21% year-over-year to $4.0 million, or $0.07 per share. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) advanced 63% year-over-year to a record $10.8 million, or $0.18 per share.

The company ended the third quarter of 2021 with cash and short-term securities of $93.0 million.

Business Outlook

After reporting record results for 2019 and 2020, GrowGeneration Corp expects to also report record results for full-year 2021.

For fiscal 2021, GrowGeneration estimates that it will report revenue between $435.0 and $440.0 million, up from its previous guidance of $415.0 to $430.0 million. For 2020, GrowGeneration reported revenue of $193.0 million.

The company expects its adjusted EBITDA for full-year 2021 to be in the range of $41.0 to $43 million. In 2020, its adjusted EBITDA were $19.2 million.

Analyst Take

GrowGeneration Corp had a transformational 2020 and 2021, with the number of its stores in the U.S. growing from 26 to 62. The company now has the nation’s biggest chain of hydroponic garden centers, which serve both commercial and craft growers.

GrowGeneration has reported excellent quarterly and annual financial results, and that momentum is expected to continue in 2022. This could lead GrowGeneration stock to explode in value.