Will GrowGeneration Continue to Move Higher?

The cannabis industry has seen an impressive rally since Joe Biden won the U.S. Presidential election. This is due to the assumption that the Democratic party will create a much more cannabis-friendly environment. The ETFMG Alternative Harvest ETF (MJ) is up more than 30% since November 4th.

One stock that has been riding this upward trend is GrowGeneration (GRWG), which has been consistently notching fresh 52-week highs. GRWG is a farm supply company that owns and operates retail hydroponic and organic specialty gardening retail outlets. The company sells products like organic nutrients and soils, advanced lighting technology, hydroponic and aquaponic equipment, and other products needed to grow indoors and outdoors.

GRWG also operates an online superstore for cultivators and its subsidiary, GrowGeneration Hemp Corp, was formed to develop and sell hemp agricultural products. The company has positioned itself in a very unique niche, which will allow them to benefit from the overall growth of the cannabis sector as more states legalize marijuana.

The company has also been delivering strong financial results quarter after quarter. This past quarter was no different. GRGW’s revenues rose 153% to $55.0 million. Same-store sales came in at $33.4 million compared with $19.2 million for the third quarter last year, a 73% increase year over year.

In addition, adjusted EBITDA for the quarter was $6.6 million, an 230% increase of year over year. The company also increased its 2020 full year revenue guidance to $185-$190 million and its 2021 full- revenue guidance to $280 million-$300 million.

It's clear that despite the challenges the industry faces due to the pandemic, growth has not been an issue for GRWG. Since hitting a low of $2.62 at the start of the year, GRWG has risen to be one of the top-performing cannabis stocks of 2020.

According to the new analyst feature of the StockNews POWR Ratings, eight out eight analysts who cover the stock, rate it as a “Buy”. In addition, GRWG is also rated a “Strong Buy” by the POWR Ratings system.

Considering the compound annual growth rate that the cannabis sector is expected to experience over the next 5 years makes me believe that GRWG still has the potential to continue higher. If, however, there is a slowdown in revenue growth, we may see a pullback after this tremendous run. For now, I remain highly bullish on GRWG. 

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GRWG shares were trading at $34.31 per share on Monday morning, down $1.28 (-3.60%). Year-to-date, GRWG has gained 736.83%, versus a 13.97% rise in the benchmark S&P 500 index during the same period.

Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles.

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