GrowGeneration Corp: Cannabis Stock Up 123% in 2019, Reports Record Q2 Revenue and Net Income

GrowGeneration Corp Cannabis Stock Up 123% in 2019, Reports Record Q2 Revenue and Net Income
iStock.com/Rick_Thompson

GrowGeneration Corp’s Transformational Year Continues

GrowGeneration Corp (OTCMKTS:GRWG) continues to improve on its transformational year. The company ended 2018 with record full-year results and has continued to report record results in 2019. Keep in mind that profitability is something that is sorely lacking in the cannabis industry.

Despite posting a 123% gain in 2019, GRWG is not a cannabis stock that is on the radar of most marijuana investors. However, that may soon change: the Denver, Colorado-based company has applied to uplist to the Nasdaq. That means retail investors will finally get to see what some astute hedge funds have known for a while now.

GRWG Stock Overview

GrowGeneration Corp owns the largest chain of specialty hydroponic and organic gardening centers in the U.S. Its ultimate goal is to own and operate GrowGeneration stores in every major U.S. state and province in Canada. (Source: “About,” GrowGeneration Corp, last accessed August 9, 2019.)

The Denver-based company sells thousands of products that are used by both major multi-state commercial operations and home growers. It also operates an online superstore, HeavyGardens.com, and provides commercial consulting and harvesting services, as well as greenhouse design and buildout services.

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GrowGeneration’s ever-expanding retail footprint is made up of 24 locations in nine states, including California, Colorado, Michigan, and Washington.

GRWG Stock Information
Market Cap $138.5 Million
52-Week Change 36.7%
52-Week High $5.20
52-Week Low $2.05
Shares Outstanding 28.8 Million
Float 26.2 Million
50-Day Moving Average $3.85
200-Day Moving Average $3.25

(Source: “GrowGeneration Corp. (GRWG),” Yahoo! Finance, last accessed August 9, 2019.)

GRWG stock was a bit volatile in the first half of 2019, but turned bullish at the end of June. Since that time, the company announced that it closed on $12.8 million in a private placement, named former Home Depot Inc (NYSE:HD) CEO Bob Nardelli as its new Strategic Senior Advisor, and reported record second-quarter revenue and net income.

The company is up more than 120% year-to-date but could still double from current levels over the coming quarters.

Chart courtesy of StockCharts.com

Record Q2 Revenue and Net Income

On August 8, GrowGeneration announced that second quarter revenue for the period ended June 30, 2019 increased 172% year-over-year to $19.5 million, from $7.2 million last year.

The huge increase is attributable to its new e-commerce site and the 14 new stores it opened or acquired after April 1, 2018. Combined, these accounted for $12.7 million in revenue in the second quarter of 2019. (Source: “GrowGeneration Reports Record Q2 2019 Revenues and Net Income,” GrowGeneration Corp, August 8, 2019.)

Net income was $1.06 million, compared to a net loss of $929,959 in the same prior-year period. Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) was $1.7 million, compared to adjusted EBITDA loss of $205,758 in the second quarter of 2018.

As a result, GrowGeneration raised its revenue guidance for 2019 to a range of $65.0 million to $70.0 million. At the midpoint, that represents year-over-year growth of 132%. The company expects full-year 2019 adjusted EBITDA to be in a range of $0.14 to $0.18 per share.

Analyst Take

GrowGeneration Corp continues to have an excellent year. It is expanding its footprint through organic growth and acquisitions which is helping it report record revenue growth and profitability. Thanks to a strong cash position of $18.0 million, management expects GrowGeneration to continue to grow at an annual rate of 100%.

Looking ahead, GrowGeneration has a strong pipeline of acquisition targets sets to close in the back half of 2019 and is working with a national real estate company to locate properties in every major city in the U.S.

At a time when many pot stocks with nosebleed valuations are taking a (some would say well-deserved) hit, investors have finally begun to pay attention to actual fundamentals. This bodes well for under-the-radar cannabis stocks like GRWG stock.

GrowGeneration Corp may already be up more than 120% in 2019, but it’s just getting started.