GrowGeneration stocks hit by analyst demotion, but still offer an edge

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GrowGeneration (NASDAQ: GRWG) was not the most popular marijuana company on the market on Tuesday following a recommendation from an analyst tracking down the hydroponics retailer. Alliance Global Partners tipster Aaron Gray has downgraded his outlook on equities; he now considers them neutral compared to the previous purchase.

At the same time, however, he increased his GrowGeneration share price target to $ 54 per share. Previously, this was $ 45.

In his research note, Gray wrote that despite the recent increase in the company’s forecast, its valuation is now full – hence the recommendation’s shift to neutral.

Image source: Getty Images.

Unlike almost all other marijuana stocks, GrowGeneration has been a big hit with investors since mid-2020. The last two quarters of the company have been profitable, while its turnover has increased at very attractive rates. Another factor that sets it apart is that as a retailer of products for growers, it is not subject to the web of legal restrictions that limit the marijuana companies more directly involved in the sale of the drug.

GrowGeneration is also an active and busy acquirer of hydroponic retail assets, a strategy that is quickly positioning it as a force in its still rather small segment.

With his adjustments, Gray leaves room for modest price appreciation despite the neutral recommendation. The new target of $ 54 per share is 7% above the stock’s current level.

Speaking of which, GrowGeneration fell 2.4% in trading on Tuesday. It was worse than the essentially stable performance of the S&P 500 Index that day.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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