GrowGeneration Corp.
GRWG
recently announced the acquisition of 55 Hydroponics, a hydroponic and organic fertilizer superstore located in Santa Ana, CA. With this buyout, GrowGeneration currently has 18 locations in California — the country’s largest legal cannabis market — with nine locations in Southern California.
55 Hydroponics has been in operation since 2010 and is currently a dominant hydroponics supplier in Orange County with annual revenues close to $10 million. Aided by 55 Hydroponics’ customer base, cultivation expertise, and a huge inventory of top-notch supplies, GrowGeneration will be able to cater to Southern California’s growers better.
This acquisition comes on the heels of GrowGeneration’s buyout of Char Coir, which helped expand its private label offerings. Char Coir is currently the highest-grade coco coir substrate available in the market. Char Coir’s line of coco products is expected to add in excess of $15 million in revenues to GrowGeneration in 2021.
Earlier this month, the company announced that it has signed two new leases in Los Angeles County, CA, as the future sites of two new GrowGeneration Super Hydroponic Garden Centers. These leases represent 122,000 square feet of retail and distribution space. In addition to offering the largest selection and best-in-class customer service, these centers will serve as distribution and direct fulfillment centers to service the large commercial markets. These centers will also distribute the company’s private label products that are crucial to its growth plans.
Following these acquisitions, GrowGeneration will operate close to 800,000 square feet of retail and warehouse space across 53 locations. Notably, 11 of those are located in the important Southern California market.
Acquisitions: A Key to Future Growth
GrowGeneration has been active on the acquisition front — making eight buyouts in 2020 and six this year. These buyouts are in sync with the company’s plans to take its tally of garden center locations to 55 by the end of 2021. It is also focused on expanding its footprint in California. Hydroponics have been a staple in cannabis cultivation, and as states across the country continue to legalize the latter, the company’s products are in demand. Considering that California accounts for 20% of the United States’ legal cannabis sales and its cannabis market is projected to grow to $5 billion by 2022, it is a crucial market for the company.
In January, GrowGeneration pre-announced record full-year 2020 revenues and hiked revenue guidance for the current year. The company’s full-year 2020 revenues were $192 million compared with $80 million in 2019. The company raised 2021 revenue guidance to the range of $335 million to $350 million. It projects adjusted EBITDA between $38 million and $40 million.
The company has been gaining from ongoing strength in sales on all fronts — online, commercial and retail. 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 provides both options — delivery or pick-up from store. This initiative is expected to bolster sales.
Price Performance
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Shares of the company have soared 239.5% in the past six months, compared with the
industry
’s rally of 45.7%.
Zacks Rank & Stocks to Consider
GrowGeneration currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space include
Impala Platinum Holdings Limited
IMPUY
,
Fortescue Metals Group Limited
FSUGY
and
Nucor Corporation
NUE
. All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
Impala Platinum has an expected earnings growth rate of 198% for the current fiscal year. The company’s shares have soared 93% in the past six months.
Fortescue has a projected earnings growth rate of 84.3% for the current fiscal year. The company’s shares have surged 33% in the past six months.
Nucor has an estimated earnings growth rate of 42% for the current fiscal year. The company’s shares have appreciated 42% over the past six months.
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