GrowGeneration Corp Up 100% Year-Over-Year
GrowGeneration Corp (NASDAQ:GRWG) is a marijuana stock that I’ve been bullish on for a long time now.
And for good reason.
The company has an aggressive acquisition strategy; it recently reported record revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA); and it increased its full-year guidance. In December 2019, it uplisted to the Nasdaq and in June 2020 it was added to the Russell 3000 Index.
On top of that, Wall Street recently set a price target for GrowGeneration of $15.00 per share; that represents about 110% upside from the current level. Strong gains indeed, but far below my target.
I initiated coverage of GrowGeneration Corp back in May 2019, when its shares were trading at $3.10. Since then, GRWG stock has soared by about 130%. Keep in mind, those gains include the broad-based stock market correction spurred on by COVID-19.
In January 2020, I provided an update on GrowGeneration stock. At the time, it was trading at $4.14. Wall Street, which tends to be very conservative, had a 12-month price forecast of $8.00 back then, suggesting upside of 93%. I provided a more aggressive 12-month forecast of $9.50, representing a gain of 121%.
Even with the appearance of COVID-19 and a U.S. recession, that aggressive projection may have been a little conservative. With everything going on at GrowGeneration, a new 12-month forecast for GRWG stock of 18.00 is not out of the question.
At current levels, that represents a potential gain of approximately 150% for GrowGeneration stock.
GRWG Stock Overview
If we were in the gold rush, GrowGeneration would be selling shovels to miners. Instead, it’s 2020 and the Denver-based company sells more than 10,000 hydroponic products to large multi-state commercial operators and individual home growers. (Source: “Investor Presentation May 2020,” GrowGeneration Corp, last accessed July 14, 2020.)
GRWG owns and operates the largest chain of specialty hydroponic and organic garden centers in the United States. Its national footprint includes 27 sales/service centers in 10 states. The company is also targeting six new states: Arizona, Illinois, Missouri, New Jersey, New York, and Pennsylvania.
It also operates the online superstore “HeavyGardens.com.”
GrowGeneration also sees a big opportunity with private-label products. Sold under the “Sunleaves” brand, GrowGeneration began its private-label program in the fourth quarter of 2019.
If these products prove to be popular, GRWG will expand its private-label offerings and sell them through other retailers.
Chart courtesy of StockCharts.com
Record Revenue & Adjusted EBITDA
On May 14, GrowGeneration announced that its revenue for the first quarter of 2020 increased 152% year-over-year to a record $33.0 million. This represents the company’s 10th consecutive quarter of record revenue. (Source: “GrowGeneration Reports Record Q1 2020 Revenues of $33.0 Million and Record Adjusted EBITDA of $2.7 Million,” GrowGeneration Corp., May 14, 2020.)
Adjusted EBITDA was a record $2.7 million, compared to $600,000 in the first quarter of 2019.
Net income from store operations was approximately $5.3 million, a 207% increase over the $1.7 million for the quarter ended March 31, 2019. Overall, GRWG reported a net loss of $2.1 million, or $0.055 per share, compared to first-quarter 2019 net income of $299,000, or $0.01 per share.
On May 11, GrowGeneration had $12.9 million in cash. At the end of the first quarter, working capital stood at $31.7 million.
GrowGeneration increased its guidance for fiscal 2020 and now expects to report revenue of $135.0 to $140.0 million and adjusted EBITDA of $12.0 to $14.0 million.
For the second quarter, GrowGeneration expects to report revenue of $36.0 to $37.0 million and adjusted EBITDA of $3.6 million.
GrowGeneration stock isn’t exactly an overlooked pot stock, but it is underappreciated and continues to be one of the best marijuana stocks out there.
Despite the COVID-19 pandemic wreaking havoc on the markets, GrowGeneration Corp actually increased its full-year guidance.
That gives you an idea of how well run this company is, and the kind of near- and long-term growth potential it has. Profit Confidential readers have known this for a while now, but Wall Street is only waking up to GrowGeneration’s potential.