Is GrowGeneration the Best Cannabis Stock for 2020?
Cannabis stocks with 600% gains tend to turn heads. GrowGeneration (GRWG), a Denver-based hydroponics, and organic specialty products company is certainly living up to its name in 2020 with an astounding growth rate that continues to turn heads. GRWG is one of the best cannabis stocks in 2020 and it’s currently rallying on expectations that the U.S. government will legalize pot federally. But is GrowGeneration THE best cannabis stock for 2020?
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GRWG: Strong Financials
GrowGeneration’s Q3 financials look quite good. GRWG saw a 153% growth in revenue compared to the same period in 2019. Same-store sales grew by 73% from $19.2 million in Q3 of 2019 to $33.4 million in Q3 of 2020. EBITDA for the quarter was also 230% higher compared to Q3 of 2019. The management attributed its stellar growth to the expansion in commercial and e-commerce business segments.
Online sales grew by 112%. The company’s commercial division increased revenue by 188%. Another milestone is that its private-label surpassed $1million in revenue this quarter. This was the 11th consecutive quarter that GrowGeneration reported an increase in revenue. The company expects to make about $300 million in revenue in 2021, which is a 1,000% surge from the $30 million it derived in 2018.
GrowGeneration: Powered by Growth
GRWG sells both through its retail stores as well as an online play that offers over 10,000 products. Apart from that, GrowGeneration also offers greenhouse design solutions and harvesting solutions. The company’s $1.7 billion market capitalization has come through a series of acquisitions.
Founded in 2014, GrowGeneration has never wavered from its growth play. It has about 31 stores operating in 11 states and is now eyeing additional states for further expansion. The company is always in search of growth opportunities and doesn’t shy away from making a sound bet. See the latest Q3 GRWG Financial Results below.
For example, when the company saw a huge opportunity in the private label product market, it came up with its private label products. Some of the recent acquisitions made by the company include assets of Emerald City Garden, in Concord, California, Hydroponic Depot in Phoenix Arizona, The Big Green Tomato, a two-store chain situated at Battle Creek and Taylor, Michigan, and finally, on 29th of October, it signed the agreement to purchase assets of the third largest chain of hydroponic garden centers in the US and of Growbiz, which has five stores in California and Oregon.
When a company has multiple alternatives to fall back on, it mitigates the downside risk caused by pandemics and lockdowns substantially, and that is something that has held GrowGeneration in good stead over the last eight months.
GrowGen: Capitalizing on Explosive Growth of the Cannabis Industry
GrowGeneration CEO, Darren Lampert recently said that “the success of GrowGeneration.. is tied directly to the growth of the cannabis industry, which is exploding”. There has been a change in the attitude of people towards pot. Thirty-five states in America have already legalized it for out of which 15 states allow adults to consume marijuana for recreational purposes. Estimates say the US marijuana industry would generate $85 billion in sales in 2030. From all accounts, GrowGeneration is in no mood to curb its growth. Expect more acquisitions in 2021.
All the above-mentioned points indicate GRWG stock still has multiple revenue drivers. It is well-positioned for long-term growth. However, the stock might currently (as of the time of this publication 12.02.20) be in the “overbought” territory. The stock price is currently ( ) while the average analyst target is $28-$30. If you are a bargain hunter, you might consider waiting and hoping for the stock to cool down. But this also means that you run the risk of losing the opportunity to get the stock at a cheaper rate in case that a price correction never comes.
Is GrowGeneration the Best Cannabis Stock for 2020?
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