Ancillary Cannabis Stocks: Top Picks for Q4 2023 in the Thriving Market
In the ever-changing cannabis market scene, Q4 2023 offers appealing potential for investors. As legalization advances, ancillary cannabis stocks, including equipment providers that power cultivation, take center stage. This article examines the main competitors to monitor, technical analysis, and wise risk management measures.
The cannabis industry’s spectacular rise continues, with global legalization attempts opening new markets. In this frenzy, ancillary companies emerged as hidden gems, providing critical services to cannabis growing, processing, and distribution. Equipment makers play a critical role in maximizing yields and preserving quality by supplying cutting-edge technologies and tools.
Navigating the volatile cannabis market takes more than just industry expertise; it necessitates a thorough understanding of technical analysis. Investors might use chart patterns, indications, and trends to make informed selections. However, the inherent volatility necessitates prudent risk management, focusing on diversified portfolios and stop-loss strategies. Staying connected to industry trends and analytical insights as we enter Q4 2023 will be critical in capitalizing on the ancillary cannabis stock rise.
Top Ancillary Cannabis Stocks for Q4 2023
- 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, the world’s largest name-brand consumer lawn and garden product maker, has entered the cannabis sector. The company’s wholly-owned subsidiary, Hawthorne Gardening, provides hydroponic equipment, lights, and fertilizers for cannabis production. In January, Scotts added True Liberty Bags and Luxx Lights to their Hawthorne range. Hawthorne will be able to increase its already impressive array of lighting products due to the acquisition. Despite the decline in earnings, Hawthorne’s year-end forecast remains unchanged.
Third Quarter Details
- Company-wide third-quarter net sales decreased 6% due to Hawthorne’s decline of 40%; U.S. Consumer net sales increased 1% over the prior year.
- Consumer POS dollars were up 8% in the third quarter and over 5% year-to-date
- Year-to-date cash flow improved by over $700 million
- Total Project Springboard savings to exceed $300 million
- Full-year sales and Adjusted EBITDA are expected to decline
- Amended credit agreement updates leverage glide path, providing operational flexibility
SMG Stock Performance
SMG stock closed at $51.31 on August 23rd, down 22.43% in the past 3 months. The stock has a 52-week price range of $39.06-$88.61 and is down 31.46% in the last year. According to analysts at CNN Business, SMG stock has a 12-month price target of $70 per share. This forecast represents an increase of 36.37% from its last trading price of $51.31.
Hydrofarm Holdings Group, Inc.
Hydrofarm is a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, including grow lights, climate control solutions, growing media, and nutrients, in addition to a diverse portfolio of proprietary and innovative branded products. For over 40 years, Hydrofarm has supported producers in making growing easier and more productive. The company aims to produce goods that will assist growers, farmers, and cultivators in improving their growth projects’ quality, efficiency, consistency, and speed.
Second Quarter 2023 Highlights vs. Prior Year Period:
- Net sales decreased to $63.1 million compared to $97.5 million.
- Gross Profit increased to $14.5 million compared to $7.3 million. Gross Profit Margin increased to 23.0% of net sales compared to 7.5%.
- Adjusted Gross Profit(1) increased to $17.0 million compared to $9.1 million. Adjusted Gross Profit Margin(1) increased to 27.0% of net sales compared to 9.3%.
- Net loss was $12.9 million compared to net loss of $203.3 million.
- Adjusted EBITDA(1) increased to $2.5 million compared to $(6.8) million.
- Cash from operating activities of $9.9 million and Free Cash Flow(1) of $8.3 million.
Updated Full Year 2023 Outlook:
- Net sales of approximately $230 million to $240 million.
- Adjusted EBITDA(1) that is modestly positive.
- Positive Free Cash Flow(1).
HYFM Stock Performance
HYFM stock closed at $0.99 on August 23rd, up 1.38% in the last three months of trading. At present, HYFM stock has a 52-week price range of $0.6720-$3.80, down 70% in the past year. According to analysts at CNN Business, HYFM stock has a 12-month median price target of $1.27. In this case, this would represent an increase of 31.23% from its last trading price of $0.99.
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GrowGen is a specialty retail hydroponic and organic growing center owner and operator. The company today operates 62 locations in 18 states. GrowGen also has an online cultivator superstore at growgeneration.com. In addition, GrowGen provides and sells a comprehensive range of goods for commercial and home growers, including organic nutrients and soils, cutting-edge lighting technology, and cutting-edge hydroponic equipment indoors and outdoors.
Second Quarter 2023 Highlights
- Net sales increased 12% quarter-over-quarter to $63.9 million.
- Comparable store sales decreased 15.1% from the prior year.
- A gross profit margin of 26.8%, a decrease of 1.7% from the prior year
- Net loss of $5.7 million and Adjusted EBITDA(1) gain of $0.9 million
- Year-to-date cash flow provided by operations of $7.4 million
- Cash, cash equivalents, and marketable securities of $70.6 million
- Changing full-year 2023 guidance for revenue to be $220 million to $225 million and Adjusted EBITDA(1) to be a loss of $4 million to $6 million
Fiscal Year 2023 Financial Outlook
- Revenue guidance for 2023 is changed to be between $220 million to $225 million.
- Adjusted EBITDA(1) guidance is changed to be between a loss of $4 million to $6 million.
GRWG Stock Performance
GRWG stock closed at $2.65 on August 23rd, down 25.56% in the last three months of trading. In addition, GRWG stock has a 52-week range of $2.60-$8.63 and is down 45.25% in the last year. According to analysts at CNN Business, GRWG stock has a 12-month median price target of $4.38. In this case, this represents a 65.09% increase from its last trading price of $2.65.
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Ancillary Cannabis Stocks Poised for Success in Q4 2023
With an enticing landscape, the appeal of ancillary cannabis stocks in Q4 2023 draws savvy investors. As the sector grows and equipment innovation soars, strategic decisions driven by technical analysis and risk management can yield significant advantages. These supporting players are poised to thrive as global cannabis legalization sparks growth.
Seizing opportunities in a volatile market requires industry vision and analytical aptitude. As the fourth quarter progresses, keeping an eye on these top ancillary cannabis stocks might pave the path for attractive profits while reducing dangers.
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