GrowGeneration Corp Makes Another Acquisition; Stock Roars Higher

GrowGeneration stockGrowGeneration Stock Up 1,564% Year-Over-Year; Still Has Lots of Room to Run

I’ve been practically begging readers to check out GrowGeneration Corp (NASDAQ:GRWG) for years now.

And for good reason. Early pot investors were attracted to cannabis growers that promised roads paved with gold. That has yet to materialize, but it will once marijuana becomes legal in the U.S. at the federal level.

In a sometimes-volatile industry, investors could find solace in the weed sector’s most promising pick-and-shovel stock.

I first wrote about GrowGeneration Corp back in May 2019. At that time, most investors were paying attention to the big pot growers, but I always had a soft spot for the overlooked underdog that supplied the big pot growers with everything they needed to grow their weed.

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Back then, GrowGeneration stock was trading for $3.10. I speculated at the time that the stock could triple from that level. It has gone on to do more than that; since then, GRWG stock has soared by 1,610%.

GrowGeneration stock was the best-performing pot stock in 2020, advancing 844% that year. But that number is a little misleading; one year ago, the stock market was in free fall, crashing on concerns about the coronavirus pandemic.

GRWG stock is up 1,564% year-over-year and 30% year-to-date.

It comes by those gains honestly. GrowGeneration Corp has been reporting strong financial results, raising its guidance, opening new stores, and announcing a raft of new acquisitions.

GrowGeneration stock has made massive gains over the last couple of years, but it’s just getting started. Again, once recreational cannabis becomes federally legal in the U.S, you’ll discover what GrowGeneration’s real potential is.

Chart courtesy of StockCharts.com

GRWG Stock Overview

GrowGeneration is the largest hydroponics supplier in the U.S., with 50 retail and distribution centers in 11 states. It also operates an online superstore. (Source: “GrowGeneration Expands Southern California Footprint with New Super Hydroponic Garden Centers in Los Angeles County,” GrowGeneration Corp, March 9, 2021.)

The company sells thousands of products, including organic nutrients and soils, advanced lighting technology, and state-of-the-art hydroponic equipment used by commercial and home growers. GrowGeneration also sells its own branded products, which it expects will account for 10% of its total revenue in 2021. (Source: “Investor Presentation: ICR Conference 2021,” GrowGeneration Corp, last accessed January 16, 2021.)

GrowGeneration Corp says its goal is to own and operate GrowGeneration-branded stores in all major U.S. states and in Canada. That strategy has been one of the biggest drivers of the company’s financial growth.

In addition to opening its own stores, GrowGeneration has an aggressive acquisition strategy. In 2020 alone, a year that will be remembered for COVID-19 and a global recession, the company announced more than 10 strategic acquisitions, which added $100.0 million in revenue.

It has the same growth targets for 2021.

Expansion in Southern California

In early March, GrowGeneration announced that it had signed two new leases in Los Angeles County, CA, which will serve as the future sites of two new hydroponic garden centers. (Source: GrowGeneration Corp, March 9, 2021, op. cit.)

Located in the heart of downtown Los Angeles and near the Long Beach Ports in Rancho Dominguez, the leases represent an additional 122,000 square feet of retail and distribution space. Once open, they will be the largest hydroponic garden centers in Southern California.

With these two leases, GrowGeneration Corp will operate close to 800,000 square feet of retail and warehouse space across 52 locations nationwide, with 19 those locations in California—10 of them in the important Southern California market.

Acquisition of Char Coir

GrowGeneration’s acquisition strategy extends beyond real estate. On March 15, the company announced that it had acquired Char Coir, a company that produces a professional-grade growing medium made from high-grade coconut fiber. (Source: “GrowGeneration Acquires Char Coir,” GrowGeneration Corp, March 15, 2021.)

The acquisition of Char Coir marks another step in GrowGeneration’s focus on further developing its private-label offerings.

Established in 2014, Char Coir is recognized as providing the best coco coir substrate on the market. Char Coir’s products are 100-percent biodegradable and compostable.

Char Coir’s line of products is projected to add more than $15.0 million in revenue to GrowGeneration in 2021.

Preannouncement of Record 2020 Results & Increased Guidance

In January, GrowGeneration pre-announced record fourth-quarter revenues of $61.5 million, bringing its full-year 2020 revenue to a record $192.0 million, up 140% from full-year 2019. The company’s full-year 2020 same-store sales were up 63%. (Source: “GrowGeneration Preannounces Record Full-Year 2020 Revenues and Increases Preliminary 2021 Guidance,” GrowGeneration Corp, January 11, 2021.)

In 2020, GrowGeneration acquired 14 new stores, increasing the number of its locations nationwide to 39. By the end of 2021, it expects to be operating 55 stores.

As the company continues to outpace its guidance, it has increased its 2021 revenue projection to the range of $335.0 to $350.0 million.

GrowGeneration Corp also increased its 2021 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance to the range of $38.0 to $40.0 million, up from its previous full-year 2021 adjusted EBITDA guidance of $34.0 to $36.0 million.

The company will report its official fourth-quarter results on March 24.

Analyst Take

What’s not to love about GrowGeneration stock? It represents a profitable hydroponics company that has been reporting record triple-digit revenue growth—a trend that the company expects to continue this year.

By all accounts, 2021 could be another transformational year of growth for GrowGeneration Corp and its share price.