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 Improvements Continue

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, GrowGeneration stock is not on the radar of most marijuana investors. However, that may soon change: the Denver-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 United States. Its ultimate goal is to own and operate GrowGeneration stores in every major U.S. state and Canadian province. (Source: “Our Story,” GrowGeneration Corp, last accessed August 9, 2019.)

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

GrowGeneration stock was a bit volatile in the first half of 2019, but turned bullish at the end of June. Since then, the company has closed on a $12.8-million private placement deal, 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.

GRWG stock is up more than 120% year-to-date but it could still double from its current level over the coming quarters.


Chart courtesy of StockCharts.com

Record Q2 Revenue and Net Income

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

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 retail operations 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 $1.1 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 an adjusted EBITDA loss of $205,758 in the second quarter of 2018.

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

Analyst Take

GrowGeneration Corp is continuing to have an excellent year. The company has been expanding its footprint through organic growth and acquisitions, which has been helping it report record revenue growth. 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 deals that are set to close in the second half of 2019. Furthermore, the company is working with a national real estate company to locate properties in every major city in the United States.

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 the fundamentals. This bodes well for under-the-radar cannabis stocks like GrowGeneration stock.

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