GrowGeneration Posts Upbeat Q3 Results; Street Says Buy

Specialty hydroponic and organic garden centers operator GrowGeneration Corp. (GRWG) has reported better-than-expected results for the third quarter ended September 30, 2021. The robust results were on the back of strong growth in revenues.

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Following the earnings, shares of the company declined 3.3% on Thursday. The stock, however, gained 4.5% to close at $23.60 in the extended trading session.

Revenue & Earnings

GrowGeneration reported quarterly revenues of $116 million, a significant jump from the previous year’s figure of $55 million. Moreover, the figure topped the consensus estimate of $114.78 million. The strong growth in revenues can be attributed to the 15.7% year-over-year rise witnessed in same-store sales to $59.2 million.

The company reported quarterly earnings per share (EPS) of $0.18, which denotes a year-over-year growth of 38.5%. Further, the figure surpassed the consensus estimate of $0.09 per share.

Other Operating Metrics

The company reported adjusted EBITDA for the quarter at $10.8 million, which compares favorably with the previous year’s figure of $6.6 million.

Guidance

For 2021, the company forecasts revenue in the range of $435 million to $440 million against the consensus estimate of $448.4 million.

Management Commentary

The CEO of GrowGeneration, Darren Lampert, said, “At present, we have 62 retail locations in operation. We increased our inventory positions across all key product categories to get ahead of price increases, as well as expanded more private label purchases. Our private-label and proprietary products reached approximately 8.7% of our overall sales in the third quarter. Our online marketplace, including Agron, is on pace to reach $35 million of revenue for 2021. We opened two locations in the Los Angeles metro area, and for next year, we are looking to open 15 to 20 locations.”

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Price Target

On November 11, Roth Capital analyst Scott Fortune reiterated a Buy rating on the stock. The analyst, however, lowered the price target from $40 to $35, which implies upside potential of 55% from current levels.

The analyst believes that constraints from the ongoing supply-demand imbalance across West coast states will continue into 2022.

Consensus among analysts is a Strong Buy based on 5 unanimous Buys. The average GrowGeneration price target of $41.80 implies upside potential of 85.1% from current levels. Shares have declined 7.1% over the past year.