Taking Advantage Of This Downtrend In Pot Stocks
Are you looking for top marijuana stocks to buy in 2021? For more than 8 months the best cannabis stocks to invest in have seen significant declines in the market. After reaching new highs in February the cannabis sector has now fallen to some of the lowest trading levels seen this year by investors. In October the markets have seen an increase in volatility that’s had a negative effect on pot stocks in the market. One area that has declined significantly this month is ancillary marijuana stocks.
Ancillary companies are those companies that support the cannabis industry without touching the actual plant. In 2020 some of these cannabis companies delivered high returns for investors. One area of ancillary companies that is well-positioned to grow alongside the cannabis market is hydroponic supply and lighting equipment companies. As the US cannabis industry continues to grow rapidly these companies are using mergers and acquisitions to grow their footprints quickly.
In 2021 leading cannabis companies are showing strong revenue growth lead by an increase in the demand for cannabis across the US. This trend is expected to continue for several years giving this general area of the market growth potential. Generally, ancillary cannabis stocks have shown more stability than vertically integrated pot stocks in this recent downtrend. Because ancillary cannabis stocks are holding their value better more investors are showing interest in this area of the market for long-term cannabis investments.
Investing In The US Cannabis Industry In 2021
Before investing in top marijuana stocks, it’s important to research the best companies before starting a position. Finding the companies with the best financials and studying how those stocks perform in the market can help you solidify the largest returns. Since Congress has yet to pass federal marijuana legalization top cannabis stocks have fallen substantially in 2021. But with the possibility increasing to see some type of cannabis reform in the next 6 months there is a future catalyst developing for top marijuana stocks.
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As we continue to see a downward trend in the cannabis sector this could be a good time to make a watchlist of top ancillary marijuana stocks in 2021. The current price point may offer significant upside for investors in the future. As we start the week let’s look at 2 top ancillary marijuana stocks to watch right now.
Best Ancillary Marijuana Stocks In 2021
- GrowGeneration Corp. (NASDAQ: GRWG)
- Hydrofarm Holdings Group, Inc. (NASDAQ: HYFM)
GrowGeneration Corp
GrowGeneration Corp. is a leading owner and operator of retail hydroponic and organic gardening stores across the US. Primarily, the company markets and distributes organics, lighting, and hydroponic equipment mainly used by cannabis cultivators. At the present time, GrowGen has 63 organic garden centers across 13 states recently opening 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. In September the company announced the opening of the largest hydroponic garden center in Los Angeles County, California.
To highlight, GrowGen reported second-quarter 2021 financials with record revenue of $125.9 million up 190% year over year. Notably, 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 15th at $21.91 down 18.52% in the last month. The stock has a 52-week price range of $15.84-$67.75 and is down 45.52% year to date. According to analysts at CNN Business GRWG stock has a 12-month median price target of $40.50 per share. In this case, this would represent an upside of 84.76% from its last trading price of $21.92.
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Hydrofarm Holdings Group, Inc.
At the present time, Hydrofarm Holdings Group, Inc. is a leading distributor and manufacturer of hydroponics equipment and supplies for controlled environment agriculture. Primarily, the company offers a variety of equipment that facilitates the cannabis growing process. Namely, 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.
In August, Hydrofarm reported its second-quarter 2021 results with net sales of $133.8 million up 46.7% year over year. As a result, gross profits increased 65% to $29.6 million or 22.1% of net sales. Additionally, the companies adjusted EBITDA increased 127.5% to $16.2 million. In July 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 manufacturers of branded products in key CEA categories.
HYFM stock closed on October 15th at $$35 .98 down 21.16% in the past month. The stock has a 52-week price range of $35.22-$95.48 and is down 32.24% year to date. According to analysts at Tip Ranks HYFM stock has a 12-month average price target of $64.75 per share. In essence, this would represent an upside of 83.95% from its current trading price.
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