The legal cannabis industry is lighting up, with global sales projected to hit a staggering $134.4 billion by 2030, driven by growing legalization and medical acceptance for chronic pain and chemotherapy nausea treatments.
While this expansion is underway, a potential federal policy shift under President-elect Donald Trump's administration could accelerate the industry's momentum. His recent support for state-level legalization and nominations for pro-cannabis heavyweights like Robert F. Kennedy Jr. for Health Secretary hints at a more cannabis-friendly regulatory climate ahead - a sentiment echoed by recent comments from ally and former NJ governor Chris Christie.
This brings focus to names like Colorado-based GrowGeneration Corp. (GRWG), a leader in hydroponic and organic gardening – a vital cog in the cannabis ecosystem. Plus, the company's President, Michael Salaman, and CEO, Darren Lampert, have been loading up on the shares after quarterly earnings.
Insider buying typically signals confidence, and with GRWG nearing its year-to-date low, could this be a golden opportunity for investors to follow suit and grab this cannabis penny stock? Here’s what investors should know.
About GrowGeneration Stock
GrowGeneration Corp. (GRWG) is a hydroponic and organic gardening company that operates 31 locations across 12 states as of the third quarter of 2024. Offering advanced lighting, organic nutrients, and hydroponic systems, GrowGeneration caters to commercial and home growers alike, blending innovation with practicality to meet the needs of indoor and outdoor gardening enthusiasts nationwide.
Valued at a market cap of $110.2 million, this penny stock peaked at $67.75 in 2021, and is now down about 97% from that high. Over the past 52 weeks, GRWG has declined 30.2%, and is off nearly 43% from its YTD high of $3.38.
However, shares of the volatile cannabis stock have now bounced 25% since setting their mid-November lows around $1.55.
GrowGeneration’s Q3 Revenue Beats Forecasts
GRWG stock surged 8.1% in a single session after revealing its fiscal Q3 earnings results on Nov. 12. While net sales dipped 10.5% year over year to $50 million - due to 25 fewer retail locations - the company beat Wall Street's estimates, fueled by strategic pivots that are beginning to pay off.
Same-store sales soared 12.5% annually, marking the first growth in three years as GrowGen streamlined its retail footprint. With 19 underperforming stores closed this year, the company focused on strengthening core locations and cutting operating expenses by 13.9% during the quarter. This operational shift boosted proprietary brand sales, which climbed to 23.8% of cultivation and gardening net sales, up from 19.4% last year. Moreover, GrowGen ended the quarter with a solid $55.2 million in cash and no debt, reinforcing its financial stability.
GrowGeneration's transformation is unfolding step by step. By Q4, its e-commerce portal will launch, shifting transactions online and boosting B2B engagement. With a smart fulfillment strategy, commercial customers can shop digitally and pick up orders at its warehouse-style stores, marking a key step in its digital transformation.
For 2024, the company projects net sales to be between $190 million and $195 million, though ongoing restructuring efforts, including store closures and inventory adjustments, may weigh on margins through year-end.
Looking further ahead, the company's strategic moves - boosting same-store sales, cutting expenses, and increasing proprietary brand sales - have laid a solid foundation for 2025. The company aims to grow proprietary brand sales to 35% in fiscal 2025, driving revenue growth, optimizing margins, and solidifying its position as a leaner, more profitable industry leader.
GrowGen has not posted profits since 2021, and analysts expect losses to continue in 2024, with a projected loss of $0.53 per share. However, the outlook brightens for 2025, as losses are expected to shrink by 41.5% to $0.31 per share.
GRWG Insider Buying Continues
When company insiders purchase stock with their own money, it often sends a bullish signal. And after the most recent earnings report, GrowGeneration's top brass - President Michael Salaman and CEO Darren Lampert - both snagged their own stock.
Together, they scooped up 115,943 shares, with Salaman buying at $1.74 per share and Lampert at $1.75 per share, totaling about $202,316. This isn’t the first time the duo has doubled down after earnings, either. Following Q2 results for fiscal 2024, the pair bought shares again, with Salaman investing $198,190 and Lampert almost matching it at $198,189.
And shortly after the company dropped its Q3 earnings report for fiscal 2023 on Nov. 8, 2023, the President and CEO made major share purchases worth $983,109 and $993,884, respectively.
Notably, the timing of these buys appears to speak volumes. The purchases followed a rocky period for GRWG stock, and both Salaman and Lampert were clearly looking to capitalize on a dip they saw as temporary.
Salaman now holds 3.28% of the company, while Lampert owns 2.93%.
What Do Analysts Expect for GrowGeneration Stock?
While coverage is light for the penny stock, GRWG has a consensus “Moderate Buy” rating overall. Out of the three analysts in coverage, two suggest a “Strong Buy,” and one recommends a “Hold” rating.
The average analyst price target of $3.42 indicates a potential upside of about 76.2% from Friday’s close. The Street-high price target of $4.00 suggests that GRWG stock could rally as much as 106%.
