GrowGeneration Corp (OTCMKTS: GRWG) is slowly breaking higher, on underlying fundamentals turning bullish. Investors who took time to read our previous update have generated significant returns as the stock continues to climb the ladder in line with the sector’s bullish momentum.
GRWG Price Analysis
One of the catalysts fuelling the upward momentum is the acquisition of GreenLife Garden Supply, a transaction that appears to have reinvigorated investor interest in the stock. The posting of record revenues for Q1 is another development that continues to excite the markets, consequently fuelling the upward momentum.
A break out of a tight trading range, of between $2.50 and $3.40, has since come into play thanks to renewed investor interest. A breach of the $3.50 resistance level opens the door for GrowGeneration to make a run for the $4.90 level, the next resistance level.
Above the $3.50 mark, GrowGeneration looks bullish as a bounce-back play after imploding in 2018. Conversely, the $3.50 mark is now the support level, above which the stock looks set to continue edging higher. A breach of the support level would leave the stock susceptible to further drops probably back to the $2.50 handle.
What Does GrowGeneration Corp Do?
GrowGeneration operates retail hydroponic and organic gardening stores. The Company has built a robust network made up of 24 stores spread across some of the biggest markets in Colorado, California, Washington, Michigan, Maine, and Las Vegas.
Record Q1 Results
Shares of GrowGeneration have started surging after a period of consolidation on investors reacting to a spree of positive developments that affirm underlying developments as well as long-term prospects. The Company reporting record revenues and earnings for the first quarter is one of the catalysts that continues to prop the stock’s market sentiments.
Revenues of $13.1 million for the first three months of the year represent a 199% year-over-year growth. Same-store sales in the quarter were up 42% as the Company benefited from the opening of new stores in Denver, Colorado, Palm Springs as well as Oklahoma.
Gross profit margin in the quarter stood at 28.2% compared to 27.1% as of the first quarter of last year. GrowGeneration generated a net income of $229,421 in the quarter, an improvement from a net loss of $953,430 generated a year earlier. The Company exited the quarter with cash and cash equivalents of $6.6 million.
According to the Chief Executive Officer, Darren Lampert, GrowGeneration remains well positioned to post impressive results going forward given that Q2 is usually the strongest quarter on revenue and income generation
“The newly acquired stores and our new store openings are all performing better than expected. We have a strong pipeline of new acquisition targets set to close in Q2. The Company continues the process of up listing the Company to a larger exchange. We are increasing our guidance for 2019 revenue to $60M – 65M and adjusted EBITDA to $.14 – $.18 per share for 2019,” said Mr. Lampert.
GrowGeneration Corp remains well positioned to deliver a record-breaking year on revenue and income generation, given the kind of acquisitions it has completed in the recent past. In the recent past, the Company has completed the acquisition of assets belonging to Green Life Garden Supply.
The acquisition of two locations in Maine, as well as one location in New Hampshire, means the Company now has five retail and warehouse locations servicing a number of commercial cultivators in the greater New England market.
GreenLife acquisition is poised to add as much as $7 million into GrowGeneration bottom line in the form of new revenues.
“Green Life, strategically located in the heart of New England, adds one of the largest and highest volume hydroponic chains in the country. Further, this acquisition positions the Company well to service the adjacent states, New York and New Jersey, that have been actively moving towards adult-use legalization,” explained Mr. Lampert.
What Next For GrowGeneration
GrowGeneration Corp should continue to trend higher in response to improving underlying fundamentals. Record revenues and earnings are some of the fundamentals that underscore a company in a phase of robust growth. With that in mind, investor sentiments in the stock should continue to edge higher, consequently, support a spike in the share price.
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Disclosure: We have no position in GRWG and have not been compensated for this article.