A close examination reveals that this year’s seemingly endless trend of cannabis stocks is just a continuation of a trend that began in 2007, when the first marijuana dispensary opened in Colorado. Since then, legal marijuana sales have surged in Colorado, Washington, Alaska, Oregon and other states that have legalized the drug. While the industry has attracted a lot of attention, it has yet to become profitable, and many investors are taking that as a signal that the trend will soon peak, causing some marijuana stocks to lose value.
This past year was a big one for cannabis stocks, and many investors may have missed out on a chance to invest. In fact, I wrote last fall that biotech stocks were set to outperform the market, and it appeared that a number of marijuana stocks were poised to jump. But, as the year wore on, many marijuana stocks were unsure of where they were headed, and it seemed many were holding their breath. Now, in the last few weeks of 2017, these stocks have taken off, with some growing by as much as 200%.
In the wake of a changing American political climate, one U.S. marijuana company has made a substantial investment in the future of the company. Organigram Holdings Ltd. (CNSX: OGI) (OTC: OGRMF) announced in a press release on December 17 that its subsidiary Organigram Inc. (CNSX: OGI) (OTC: OGRMF) has entered into an agreement with cannabis cultivator, processor and retailer Island Garden Inc.
Outlook GrowGeneration shares are optimistic about increasing legalization
GrowGeneration Corp (NASDAQ:GRWG) has emerged as one of the biggest cannabis winners in the US in 2020. During this tumultuous year, GRWG shares rose 869% to end the year at $40.22.
This momentum continued into 2021, with GrowGeneration’s stock price reaching a record high on the 10th. February reached a record high of $67.75. Since then, GRWG’s shares have fallen a bit and at the time of writing are trading at $41.00.
However, this setback is not to blame for what is happening at GrowGeneration Corp. While the launch of the COVID-19 vaccine is in full swing and the U.S. economy is recovering, the stock market has taken a breather as investors seek to understand how rising inflation and a possible interest rate hike will affect stocks.
This has put the GrowGeneration share in a more favourable trading area. Although it is up 460% year-over-year, it is up only 1.9% over the last period and is close to the $40.00 support level.
Again: Despite the fact that investors are not happy at the moment, this stock has huge upside potential in the short and long term. GRWG stock can easily double from current levels.
It certainly has great potential for growth. GrowGeneration shares need to rise 65% to peak in February.
Among analysts providing a 12-month price target for GrowGeneration Corp, the average estimate of the stock price is $54.00 and the highest estimate is $60.00. This represents a growth potential of approximately 35% and 46% respectively.
Not surprisingly, GRWG shares will surpass February highs in the coming quarters. Wall Street is certainly optimistic about GrowGeneration stocks – not as much as I am, but still.
Why this optimism?
GrowGeneration Corp. continues to report strong financial results and solid prospects.
In 2020, the company reported record sales, exceptional earnings growth and record pre-tax profits. The forecast for 2021 has also been increased. The company announced record results for the first quarter of 2021 and again raised its outlook for the full year.
Another reason to be bullish on GrowGeneration Corp? Recreational and medicinal cannabis is becoming increasingly popular. Currently, 16 U.S. states plus the District of Columbia have legalized marijuana for recreational use and 36 states have legalized marijuana for medical use.
In the past six months, Arizona, Montana, New Jersey, New York, South Dakota and Virginia have approved measures to legalize recreational cannabis. Four other states are also considering legalization: Connecticut, Maryland, New Mexico and North Dakota.
Graph courtesy of StockCharts.com
GRWGStock list
GrowGeneration operates the largest network of hydroponic garden centers in the United States, with 55 locations in 12 states. The company plans to have 60 branches by the end of 2021 and 100 by 2023. She also runs an online gardening and hydroponics business. (Source: Investor Presentation GrowGeneration Corp, April 1, 2021).
The company sells thousands of products, including organic nutrients and soils, advanced lighting and the latest hydroponic equipment used by commercial and residential growers. GrowGeneration also offers products under its own brand, which the company expects to account for 10% of total sales by 2021.
Good start for 2021
In the first quarter of 2021, GrowGeneration announced that revenues had increased 173% year-over-year to a record $90.0 million. The company’s same-store sales increased 51% during the quarter. E-commerce revenue increased 126% to $4.4 million (Source: GrowGeneration Announces Record First Quarter 2021 Results and Raises Full Year 2021 Outlook, GrowGeneration Corp, May 12, 2021).
The company reported record net income of $6.1 million ($0.10 per share) in the first quarter, compared to a net loss of $2.0 million ($0.06 per share) in the first quarter of 2020.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $11.1 million, compared to $2.4 million for the same period last year.
Based on GrowGeneration Corp’s strong performance, management has increased its full-year expectations and now expects the company to generate revenue of $450.0 million to $470.0 million in 2021. That’s more than double the company’s revenue by 2020.
Management also increased its adjusted EBITDA guidance for 2021 to a range of $54.0 million to $58.0 million.
Analyst
GrowGeneration shares are an ideal share for investors who do not wish to invest directly in the cannabis sector. It could also be an ideal stock for investors looking to increase their initial investment.
GrowGeneration Corp. reports record results, opens new stores, announces new acquisitions and raises its outlook. The year 2000 was a year of upheaval for the GRWG stock, and all indications are that 2021 and 2022 may become even more important.The stock price of publicly-traded medical marijuana company CBG Research has taken a big jump lately, and it looks like the stock could continue its upward climb. With Canadian marijuana giant Canopy Growth Corp. (NYSE:CGC) popping on the Toronto Stock Exchange this morning, CBG Research’s shares have also been seeing a bump.. Read more about will shares crash again and let us know what you think.
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