The cannabis industry continues to maintain steady momentum with the rising consumption of recreational and medical marijuana and growing support for decriminalizing marijuana at the federal level. With 36 states and four territories…
approving cannabis products for medical use, the changing legal landscape has boosted investors’ optimism about the industry.
Because Congress is perceived to be on the verge of decriminalizing marijuana at the federal level to unwind the decades-old war on weed, several pot stocks are gaining momentum. However, not all cannabis companies are poised to capitalize on the legalization of cannabis in the United States.
Given this backdrop, we think it could be wise to avoid cannabis stocks with weak growth prospects and bleak financials. Accordingly, we believe GrowGeneration Corp. (GRWG – Get Rating), 4Front Ventures Corp. (FFNTF), Charlotte’s Web Holdings, Inc. (CWBHF – Get Rating), and Acreage Holdings, Inc. (ACRHF – Get Rating) are best avoided now.
Retail hydroponic and organic gardening store operator GRWG markets and distributes horticultural, organics, lighting, and hydroponics products. The Denver, Colo.-based company operates a chain of 59 stores and GrowGen.Pro, an online ecommerce store. GRWG sells its products to commercial and urban cultivators that grow specialty crops.
This month, GRWG acquired Los Angeles country’s Commercial Grow Supply, one of the largest hydroponic suppliers. While the acquisition may strengthen the company’s foothold in Southern California and help increase its customer base, it could require a significant cash outlay in the near term.
Also this month, GRWG acquired Washington-based Hoagtech Hydroponics, an indoor gardening and hydroponic equipment store. While this acquisition should expand its footprint in the Pacific Northwest, the transaction could negatively impact the company’s already weak cash balance in the coming months.
GRWG’s revenue increased 190% year-over-year to $125.9 million in the second quarter, ended June 30, 2021. However, the company’s total operating expenses increased 197.4% from the prior-year quarter to $26.1 million. And its store operations expenses rose 225.6% from their $12.62 million year-ago value for the quarter.
GRWG has failed to beat the consensus EPS estimates in three of the trailing four quarters. Its stock has lost 21.5% in price over the past month and 26.4% over the past three months.
GRWG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an…
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