GrowGeneration Corp: Why This Undervalued Pot Stock Could Double

GrowGeneration Stock’s Outlook Is Bullish on Expanding Legalization

GrowGeneration Corp (NASDAQ:GRWG) was one of the biggest winners in the U.S. cannabis space in 2020. During the turbulent year, GRWG stock exploded by 869% and ended the year trading at $40.22.

That momentum carried into 2021, with GrowGeneration stock hitting an all-time record high of $67.75 on February 10. Since then, GRWG stock has given up some ground, trading near $41.00 as of this writing.

That pullback isn’t the fault of anything going on at GrowGeneration Corp, however. Despite the fact that the rollout of COVID-19 vaccines has been moving along and the U.S. economy has been reopening, the stock market has been taking a breather as investors digest what rising inflation and potential interest-rate hikes will do to stocks.

This has simply put GrowGeneration stock in a better trading range. While it’s up by a whopping 460% year-over-year, it’s only up by 1.9% year-to-date, hovering near a support level of $40.00.

Again, despite investor malaise right now, this pot stock has tremendous near- and long-term growth potential. GRWG stock could easily double from its current level.

It certainly has lots of upside potential. GrowGeneration stock needs to climb by 65% to get to its February high.

Of the analysts providing a 12-month price forecast for GrowGeneration Corp, their average share-price estimate is $54.00 and their high estimate is $60.00. That points to upside of approximately 35% and 46%, respectively.

It would hardly be a surprise to see GRWG stock trump its February high over the coming quarters. Wall Street is certainly bullish about GrowGeneration stock—not as upbeat as me, but still.

Why the ongoing optimism?

GrowGeneration Corp has continued to report great financial results and provide strong guidance.

For 2020, the company reported record revenue, exceptional earnings growth, and record pre-tax net income. It also increased its guidance for 2021. For the first quarter of 2021, the company reported record results and once again, raised its full-year guidance.

Another reason to be bullish on GrowGeneration Corp? Recreational and medical cannabis continue to become more mainstream. Right now, 16 U.S. states plus the District of Columbia have legalized recreational marijuana, and 36 states have legalized medical marijuana.

Over the last six months or so, Arizona, Montana, New Jersey, New York, South Dakota, and Virginia have approved measures to legalize recreational cannabis. Four other states are also looking at legalization: Connecticut, Maryland, New Mexico, and North Dakota.

Chart courtesy of StockCharts.com

GRWG Stock Overview

GrowGeneration operates the largest chain of hydroponic garden centers in the U.S., with 55 locations in 12 states. The company expects to have 60 locations operating by the end of 2021 and 100 by 2023. It also runs an online gardening and hydroponics superstore. (Source: “Investor Presentation,” GrowGeneration Corp, April 1, 2021.)

The company sells thousands of products, including organic nutrients and soils, advanced lighting, and state-of-the-art hydroponics equipment used by commercial and home growers. GrowGeneration also offers its own branded products, which it expects to be responsible for 10% of its total revenue in 2021.

Strong Start to 2021

For the first quarter of 2021, GrowGeneration announced that its revenue climbed by 173% year-over-year to a record $90.0 million. The company’s comparable same-store sales for the quarter increased by 51%. Its e-commerce revenue was up by 126%, at $4.4 million (Source: “GrowGeneration Reports Record First Quarter 2021 Financial Results and Raises Full-Year 2021 Guidance,” GrowGeneration Corp, May 12, 2021.)

The company reported record first-quarter net income of $6.1 million ($0.10 per share), compared to a first-quarter 2020 net loss of $2.0 million ($0.06 loss per share).

Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $11.1 million, up from $2.4 million in the same period of the previous year.

Based on GrowGeneration Corp’s strong performance, management raised their full-year guidance and they now expect the company’s revenue to be between $450.0 and $470.0 million in 2021. That’s more than double the company’s sales in 2020.

Management also increased their adjusted EBITDA guidance for 2021 to the range of $54.0 to $58.0 million.

Analyst Take

GrowGeneration stock is an ideal stock for investors who don’t want to invest directly in the cannabis sector. It could also be the perfect stock for investors who want to see their initial investment soar.

GrowGeneration Corp has been reporting record results, opening new stores, announcing new acquisitions, and raising its guidance. The year 2000 was transformational for GRWG stock, and there’s every reason to believe that 2021 and 2022 could be even more massive.