The bearish run that had previously hit GrowLife Inc (OTCMKTS:PHOT) came to an end back in November 2017. During that period, their share price moved from lows of $.005 to $.01 and later to highs of $.0495 as seen in the chart below:
However, their share price later plummeted in January in line with the other companies within the cannabis sector. Over that period, their share price fell from this high to $.013 on 6th February. Two days later, courtesy of a new release from the company, their share price had risen from this price to highs of $.025, finally closing at $.0194 yesterday, representative of an increase of about 50% to its closing price.
View the company’s price action in the chart below:
With the share price having been affected so significantly by the new information, we decided to have a look at this data and assess how it will affect the long-term financials and prospects of the company.
GrowLife Inc was incorporated back in 2012 and headquartered in Washington.
Since incorporation, the company’s objective was to become one of the country’s largest green and herb cultivation centers for medical use. They provide farming services through the soil and hydroponic equipment with a specialty towards the cannabis field. Finally, the company distributes its products through its e-commerce channel as well as other retail fronts.
Over time, the expectation is that the company will harness its different channels to boost its revenues and increase their market share within the sector. Through various methods (as will be discussed later) their plans seem to be coming to fruition.
The latest news from the company shocked the market and brought its share price to a new high.
The company, on 6th February, announced that they had been testing the soil from their major indoor cultivation sites across the country. Key among this is the Colorado facility which gives them the exclusive right to about 120,000 square feet of production room – one of the country’s most extensive cultivation facilities.
The tests came back positive signifying that the soil met the pre-requisites for the growth of cannabis as stipulated by GrowLife. Furthermore, it was noted that this soil could easily accommodate the high production which the company expects to have – as a result of the additional demand that is expected within its areas of operation – going forward.
The facilities are expected to boost their operational capacity as the company continues to grow its operations within the US and Canadian regions. Furthermore, its strategic location – within Colorado – furthers their agenda for the entry into one of the largest marijuana markets in the country.
The success of the soil tests was hailed by their CEO, Corey Buffkin who stated:
“After months of testing and production, we are confident in our decision to use GrowLife HP Soil as it meets our quality and pricing needs. This high-porosity organic mix allows us to feed our plants more often, which means increased yields.”
The availability of an immediate and growing market for their produce comes as an added advantage for the company going into the future.
The above news is especially important given that the company decided to move deeper into Canada through the opening of a retail facility within the country.
With the company having built its name as one of the largest indoor cultivation networks in the country, their venture into Canada announces to the market the fact that the demand for the cultivation of cannabis within the Canadian market is quite high and that its entry into this market has come to solve this problem.
In addition to the above, the company came up with a new non-toxic and eco-friendly flooring product made from vinyl. This patented technology dubbed FreeFit™ is expected to service the growing North America market which is expected to grow at about 3.1% in the next year with current revenue of $21.35 billion. The above is also meant to ensure that they have a diverse portfolio of products going forward.
Eventually, the firm expects that through this technology they will tap into this market and boost their revenue potential into the future. With this, they will benefit from this growth and ensure that their profits, as well as cash flows, are sustainable going forward.
Their company’s performance over the third quarter of 2017 seemed quite promising as was seen by their revenues which grew by 29% over the third quarter of 2017 to close at $661,444.
However, a further analysis made this picture quite grim as the company’s loss position grew by $505,838 while their negative working capital position also stood at over $2.8 million.
Eventually, the firm’s management needs to ensure that they manage their costs and work towards a profit in future. Furthermore, their working capital needs to be boosted to ensure they have adequate funding to finance this growth.
With PHOT having moved on to actualize its strategy and become one of the largest marijuana cultivators in the country, it is only a matter of time before the company starts reaping the benefits of such a strong position. Their name is their brand and currently, their brand seems quite strong. We expect them to reap massively from this. As such, their expected share price only is headed up.
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Disclosure: We have no position in PHOT and have not been compensated for this article.