Back to top

Image: Bigstock

GrowGeneration (GRWG) Preannounces Record '20 Sales, Ups '21 View

Read MoreHide Full Article

GrowGeneration Corp. (GRWG - Free Report) shares jumped 13.8% in a day following its preannouncement of record full-year 2020 revenues of $192 million, which not only outpaced its guidance but also improved an impressive 140% on a year-over-year basis. This performance can be attributed to the company’s strategic acquisitions, expansion of its omnichannel and private label offerings, and robust same-store sales growth. The company anticipates significant growth in the ongoing fiscal year, and hiked its 2021 revenue guidance to $335-$350 million from the prior outlook of $280-$300 million.

Strong Revenue Numbers

Given its continuous focus on rapid, strategic growth in key markets — both organically and through acquisitions, GrowGeneration’s revenues have been on an uptrend in the last few quarters. Notably, the company’s revenues soared 142% to $131.4 million for the first nine-months of 2020. The momentum continued in fourth-quarter 2020 as well with the company reporting a 142% year-over-year improvement in revenues to $61.5 million, which surpassed the Zacks Consensus Estimate of $61.4 million. Same-store sales surged 58% for fourth-quarter 2020 compared with the prior-year quarter.

For full year 2020, same-store sales were up 63% compared with 2019. Full-year 2020 revenues were $192 million compared with $80 million in 2019. The company’s guidance was at $185-$190 million. However, revenues fell short of the Zacks Consensus Estimate of $198 million.

The company is witnessing strong sales in both retail and online channels. The company is averaging 12,000 walk-in transactions per week. Moreover, new visitors to its website are trending over 100,000 per month. The company has rebranded its existing e-commerce operation, HeavyGarden.com and GrowGen.Pro, as growgeneration.com, which is an omni-channel sales approach to facilitate e-commerce across all its locations. It is more customer friendly and will provide both options — delivery or pick-up from store. This initiative is expected to bolster sales.

The commercial services around 1,000 commercial accounts and the company has identified over 14,000 licensed hemp and cannabis growers in the United States, and believes there is significant room to expand its base of commercial customers.

Backed by the above-mentioned tailwinds, the company raised revenue guidance for 2021 in the range of $335 million to $350 million. The company projects adjusted EBITDA between $38 million and $40 million.

Solid Acquisition Strategy

Recently, GrowGeneration has been most active on the acquisition front since its inception.  Notably, company made eight buyouts in 2020 taking its tally of retail stores to 39. The company has raised its target to expanding to 55 garden centers in 2021 from the prior 50. Its mission is to own and operate GrowGeneration-branded stores in all the major states in the United States and Canada. Management estimates that roughly 1,000 hydroponic stores are in operation in the United States and by 2025, the global hydroponics system market is estimated to reach approximately $16 billion.  Hydroponics have been a staple in cannabis cultivation, and as states across the country continue to legalize the same, the company’s products are in demand.

Price Performance

Shares of the company have soared 180% in the past three months, compared with the industry’s growth of 42.5%.

Zacks Rank & Stocks to Consider

GrowGeneration currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space include ArcelorMittal (MT - Free Report) , BHP Group Limited (BHP - Free Report) and Impala Platinum Holdings Ltd. (IMPUY - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ArcelorMittal has a projected earnings growth rate of 287% for the current year. The company’s shares have gained around 78% in the past three months.

BHP Group has an expected earnings growth rate of 49% for the ongoing year. Shares of the company shares have appreciated 37% over the past three months.

Impala Platinum Holdings has an estimated earnings growth rate of 132% for 2021. Over the past three months, the stock has gained nearly 36%.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot stocks we're targeting >>