$GRWG is my Top Pick in the Cannabis Space
Updated
Since Q1 2018 through their most recent quarter GrowGeneration has seen quarterly sales grow 10X. As of the writing of this post the stock price is up about 4X over the same time period. They have grown sales by over 100% YoY on each of their last 8 quarterly earnings reports and have recorded bottom line profits in 4 of their last 6 quarters (a rare feat in the cannabis space). Going forward I see no signs of that slowing down. Some catalysts include legalization, earnings, and potential M&A. Legalization measures are on the ballot in New Jersey, Arizona, Mississippi, Montana and South Dakota. The most important of these is NJ where I believe it is likely to pass. This will continue to drive more and more legal production of cannabis. While the growers and distributors can be adversely impacted by fluctuations in prices GrowGeneration never actually touches nor sells the plant. They sell the materials and equipment required for growing cannabis and therefore benefit most from increased production. GRWG is set to report earnings on 11/16/2020 and I expect them to post another stellar quarter. I expect to see the stock price trade up to is previous high at about $22 ahead of the print. If they post another profitable quarter and maintain their impressive sales growth the stock could easily trade up to the $25-$30 range. Longer term the sky is the limit. In my opinion the biggest threat to GRWG is if a large competitor like Home Depot or Lowes tries to compete and sell their own cannabis production supplies. While this is not a threat to be taken lightly, but I believe the more likely outcome would be a partnership considering GrowGeneration has already developed relationships with some of the biggest cannabis growers. Trust is extremely important in the cannabis space making these relationships more valuable than they would be in other sectors. I have followed and owned this stock for a few years and plan to add on any meaningful pullback until or unless the fundamentals change course.
Note
I just wanted to give an update on GRWG. The stock has fallen close to 20% in the last week on no news and not a lot of volume. This looks like profit taking and appears to be driven by TA. GRWG held it's 50D yesterday and again today. If your not in the name already it's not too late. Keep in mind this is a volatile stock so if you can't stomach the types of moves we've seen historically, this is not the stock for you.Note
As expected cannabis was legalized in NJ and AZ and the stock prices in the cannabis space have not disappointed. In addition prohibition has ended in MT and SD as well and MS legalized medical. Low and behold after a week of profit taking heading into the election GRWG closed above $22 today, a new ATH close. The next catalyst is earnings. I expect very bullish commentary on the heals of legalization and recent acquisitions. I will be focusing on revenue growth and profitability. I expect good numbers as they continue to capitalize of the ramp up in cannabis production.
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