GRWG - Up 72% in 1 Month Is GrowGeneration Stock a Buy?
Shares of GrowGeneration (NASDAQ: GRWG) , which operates a chain of retail stores focused on the cannabis hydroponics growing business, are up 72% over the past 30 days, and there might be a lot more where that came from -- assuming the stock doesn't come falling right back down. According to its third-quarter earnings report, which was in line with analysts' estimates, sales are crashing, gross margin is narrowing, and its retail footprint is shrinking, all while management is unabashedly saying that more pain is on the way.
Nonetheless, GrowGeneration's shares are still cheap, and a new wave of cannabis legalization means that the company's market will soon grow even more. So is GrowGeneration a smart investment or is the stock's run-up a fluke that'll burn your money? Let's look at the evidence for both arguments.
When cannabis businesses set up their cultivation facilities, hydroponics equipment is key to maximizing the yield of their plants. Plus, it takes a lot of plant nutrients, grow lights, and environmental control apparatuses to keep marijuana plants happy and productive. And selling all of those critical products to businesses and consumers is how GrowGeneration is supposed to make money. Therefore, it makes sense that if the cannabis industry experiences a downturn, the company's value would take a hit, and vice versa -- though it also sells its products for general hydroponics use, which might mitigate the impact.
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Up 72% in 1 Month, Is GrowGeneration Stock a Buy?