GrowGeneration stock: Should you take a puff on this hydroponic company? – The Average Joe
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    GrowGeneration stock: Should you take a puff on this hydroponic company?

    Kevin Roche — Analyst

    July 15, 2021

    growgeneration stock

    Out of the concrete grew a rose. No soil needed.

    Share prices of GrowGeneration stock, a hydroponics company, is blooming while the rest of the basic materials industry wilts. Now, the company has raised its financial guidance after another successful quarter.

    GrowGeneration Stock: The future of crop growth

    Hydroponics (gardening without soil) is gaining popularity in farming and agriculture, and for good reason:

    • It uses water 90% more efficiently than regular crop production.
    • Production increases 3-10x in the same amount of space.

    The global hydroponics industry is expected to grow 14% annually to a size of $30b by 2028… But there’s a darker side to hydroponics than just gardening. Hydroponic is cannabis’ biggest dealer – supplying grow equipment and fertilizer to cannabis companies.

    With cannabis moving towards legalization, the hydroponics industry is about to get a lot more business.

    A generation’s worth of growth in three years

    GrowGeneration is one of the fastest companies in the space – selling hydroponics equipment and fertilizer through its network of 52 stores across 12 states.

    Its growth is also nothing short of amazing:

    • Rocket growth: $193m in 2020 sales, up 143% from $79m in 2019.
    • Profitable: $5.3m in 2020 net income, up 184% from $1.9m in 2019.

    What’s been fueling GrowGeneration stock’s growth?

    • A massive cannabis market expected to grow over 4x by 2026.
    • A big push into e-commerce.
    • An aggressive expansion strategy of opening new stores.

    With no intention of slowing down, it plans to have over 100 stores by 2023. To meet this goal, they have been acquiring competitors – among the 1,000+ smaller hydroponic retailers across the US.

    Investors: High on cannabis

    GrowGeneration is a picks and shovels play to the growing cannabis market. Instead of picking individual cannabis companies — which requires finding the right ones among hundreds — GrowG benefits as long as cannabis companies grow.

    • In 2020, more than 20% of GrowG’s sales came from the largest US cannabis operators.
    • As a supplier, it’s also unlikely to get caught up in any legal regulatory issues with the cannabis industry.

    In 2021, GrowGeneration’s share prices are up 17% after growing an unbelievable 900% in 2020. Another way of investing in cannabis is to take a hit of GrowG before puff, puff, passing it along.

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