Investing In The Cannabis Industry In 2021
Are you looking for the top marijuana stocks to buy in 2021? For over nine months investors have seen the best cannabis stocks decline in the market. Now, most of the top pot stocks are trading near the lowest price points seen so far this year. In October increased volatility for the best marijuana stocks to invest in has renewed interest from cannabis investors. One area that is well-positioned to grow alongside the cannabis industry is ancillary marijuana stocks.
Ancillary cannabis companies are those companies that support the cannabis industry without touching the actual plant. Since the first quarter of 2021, these ancillary cannabis stocks have seen a significant drop in value and are now trading near levels that analysts forecast could produce significant upside. In 2021 the biggest catalyst for top pot stocks has been federal marijuana legalization. In the first quarter, investors rallied on the belief the government would federally legalize marijuana earlier in the year.
Because this has not yet been delivered by lawmakers it has had a major effect on cannabis stocks in the market. Although leading cannabis companies have continued to deliver strong earnings and seen substantial growth this has not translated into gains in the market. One area that continues to grow alongside the cannabis market is hydroponic, and lighting supply companies.
Finding The Best Trades In The Cannabis Sector In 2021
In general, these ancillary companies have shown more stability than vertically integrated marijuana stocks in 2021. As demand for cannabis grows in the US these companies are well-positioned to supply the industry with the equipment and nutrients needed to produce the plants. Because of the growth potential for these leading ancillary cannabis companies, it could be time to start a watchlist of the best marijuana stocks right now.
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Before investing it’s important to do your own due diligence and investigate a company’s earnings, press releases, and stock performance. Looking into these elements and finding the best entry for your position can help you achieve the largest returns on your investments. Let’s look at 3 top ancillary cannabis stocks for your list in Q4 2021.
Best Marijuana Stocks To Watch In October
- The Scotts Miracle-Gro Company (NYSE: SMG)
- Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM)
- GrowGeneration Corp. (NASDAQ: GRWG)
The Scotts Miracle-Gro Company
Scotts Miracle-Gro, one of the world’s largest marketers of branded consumer lawn and gardening products and has a hand in the cannabis market. To elaborate, the company’s wholly-owned subsidiary Hawthorne Gardening is a leading supplier of nutrients, lighting, and hydroponic equipment used in the process of growing cannabis. In August the company announced its 3rd quarter financials and reaffirmed sales and earnings guidance for fiscal 2021. In September Scott’s named Cory Miller as Executive Vice President and Chief Financial Officer.
Scott’s reported company-wide Q3 sales up 8% to $1.61 billion driven by Hawthorne‘s growth of 48%. Primarily, Hawthorne sales increased to $421.9 million compared to $285.7 million. US consumer sales for Scott’s declined by 4% in the third quarter but remained 19% higher year to date. As a result, Scott’s saw company-wide sales increase to $4.19 billion up 29% for the first 9 months of fiscal 2021. In the third quarter, Scott’s acquired Hydrologic Purification Systems California-based accessories and provider of water filtration and purification products in the cannabis market. The company is expected to deliver fourth quarter 2021 results on November 3rd before the market opens.
SMG stock closed on October 22nd at $147.34 down 26.01% year to date. Currently, the stock has a 52-week price range of $139.20-$254.34. According to analysts at Tip Ranks SMG stock has a 12-month average price target of $209.20 per share. Based on this analysis this would represent an upside of 41.98% from its last trading price.
Hydrofarm Holdings Group, Inc.
Hydrofarm Holdings Group, Inc. is a leading distributor and manufacturer of hydroponics equipment and supplies for controlled environment agriculture. In general, the company offers a variety of equipment that facilitates the cannabis growing process. Primarily, the company offers high-intensity grow lights, climate control solutions, and growing media, as well as a broad portfolio of innovative and proprietary branded products. Hydrofarms has been in business for over 40 years helping growers in the US and Canada achieve premium-quality farming products.
Hydrofarm reported its second-quarter 2021 results with net sales of $133.8 million up 46.7% year over year. To highlight, gross profits increased 65% to $29.6 million or 22.1% of net sales. In addition, the companies adjusted EBITDA increased 127.5% to $16.2 million. Also, the company announced it completed the acquisition of Aurora Innovations and its organic nutrients and grow media operations. In August, the company announced the acquisition of a leading Canadian nutrient company Greenstar Plant Products, Inc. Specifically, this acquisition continues Hydrofarms efforts of acquiring manufacturers of branded products in key CEA categories.
HYFM Stock closed on October 22nd at $34.85 down 16.45% in the last month. The stock has a 52-week price range of $34.02-$95.48 and is down 33.64% year to date. According to analysts at CNN Business HYFM stock has a 12-month median price target of $65.00 per share. In this case, this would be an increase of 86.51% from its last trading level of $34.85.
At the present time, GrowGeneration Corp. is a leading owner and operator of retail hydroponic and organic gardening stores across the US. In general, the company markets and distributes organics, lighting, and hydroponic equipment mainly used by cannabis cultivators. Currently, GrowGen has 63 organic garden centers across 13 states recently opened its 11th and 12th stores in southern California. Additionally, the company has also been working on its online presence with the launch of GrowGeneration.com. The site is a one-stop-e-commerce destination with over 10,000 products ranging from nutrients to lighting technology. In the next five years, the company is expecting to have over 100 locations operating in the US. During Q3 the company announced the opening of the largest hydroponic garden center in Los Angeles County, California.
GrowGen reported second-quarter 2021 financials with a record revenue of $125.9 million up 190% year over year. As a result, the company delivered a net income of $6.7 million and adjusted EBITDA of $14.5 million. On October 13th the company preannounced 3rd quarter 2021 revenue guidance of $114-$116 million bringing year-to-date revenue to $330-$332 million. Additionally, GrowGen gave revenue guidance for Q4 2021 of $110-$120 million. And revised full-year 2021 revenue guidance to $440-$452 million.
GRWG stock closed on October 22nd at $22.03 down 17.18% in the last month. Specifically, GRWG stock has a 52-week price range of $15.84-$67.75 and is down 45.23% year to date. According to analysts at Market Beat GRWG stock has a consensus price target of $45.00 per share. In essence, this would represent an upside of 104.3% from its last trading price of $22.03.
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