Undervalued Marijuana Stock Has 250% Upside

According to a recent article, there are four reasons for marijuana stocks being undervalued. First, the market is still too new; second, cannabis companies lack real-world use cases outside of medical marijuana and very few have established distribution channels; thirdly, regulators haven’t shown much interest in taking on any significant risk with this nascent industry until now; and fourthly investors fear that entering the space will be more costly than it might appear at first glance.

The “best marijuanas stocks 2022 reddit” is a marijuana stock that has been undervalued for quite some time. The company’s market cap is only $3 million, but the company has 250% upside potential.

Undervalued Marijuana Stock Has 250% Upside

Undervalued-Marijuana-Stock-Has-250-Upside

Hydrofarm Holdings Group Inc Announces Positive Results

The legalization of recreational marijuana is gaining traction in the United States. The United States House of Representatives approved a measure decriminalizing cannabis in early April. A medicinal marijuana research measure was approved by the House a few days later.

In April, both New Mexico and New Jersey began selling recreational marijuana legally. Maryland legislators are also planning to place a recreational marijuana initiative on the November ballot. (Source: Michelle Lujan Grisham’s Office of the Governor, “New Mexico Cannabis Sales Top $5.2 Million in First Weekend,” April 4, 2022.)

On the other side, marijuana stocks haven’t been doing so well recently. Marijuana stocks will likely fly about searching for support until recreational cannabis is allowed on a federal level.

Hydrofarm Holdings Group Inc. is an undervalued cannabis company that has taken a fair pounding (NASDAQ:HYFM). HYFM stock is now trading at $10.27, down by:

  • 37 percent in the previous month
  • In the previous three months, 44 percent has increased.
  • Year-to-date, 63 percent
  • Year-over-year growth of 83%

Those are some somber figures, but Hydrofarm Holdings Group Inc’s excellent fourth-quarter and full-year 2021 financial results—along with its strong financial outlook—appear to provide the company a bright future.

Wall Street, predictably, has hopped on the HYFM stock bandwagon. The average 12-month price objective for Hydrofarm stock is $27.67, while the high estimate is $36.00, according to analysts. This indicates a potential upside of 170 percent to 250 percent.

Undervalued-Marijuana-Stock-Has-250-Upside

StockCharts.com provided the chart.

HYFM Stock Information

Hydrofarm Holdings Group Inc is a prominent hydroponics equipment and supply producer and distributor in North America.

Equipment, Grow Media, Lighting, Nutrients, and Supplies are the company’s product categories. Fertilizers and a variety of additional additives that offer nutrients to crops are included in the Nutrients category. (Source: Hydrofarm Holdings Group Inc, “Investor Presentation: March 2022,” last visited April 27, 2022.)

For those who cultivate flowers, fruit, grains, herbs, or veggies, this is ideal. Cannabis, on the other hand, is the company’s greatest source of revenue growth.

The bulk of Hydrofarm Holdings Group Inc’s sales are of Hydrofarm-only (or mostly Hydrofarm-only) items. Furthermore, in-house manufacturing accounts for 37% of the company’s income. Consumables with recurring income streams account for around 68 percent of Hydrofarm’s revenues.

In North America, the corporation has seven production facilities and eight distribution centers. It also has a distribution center in Spain.

Since May 2021, we’ve made five acquisitions.

The acquisition strategy of Hydrofarm Holdings Group Inc is aggressive.

The corporation has spent $505.0 million on five acquisitions since May 2021, at an average price of seven times adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

Hydrofarm Holdings Group Inc’s merger-and-acquisition strategy has resulted in the addition of new manufacturers to its proprietary portfolio, including Greenstar Plant Products, Inc. in Canada, Aurora Innovations, Inc. in Oregon, and HEAVY 16, House & Garden, and Mad Farmer in California. 

Hydrofarm completed its $52.0 million purchase of Innovative Growers Equipment, Inc., a provider of horticultural benches, racking, and LED lighting systems, in November 2021. (Hydrofarm Holdings Group Inc, November 1, 2022, “Hydrofarm Completes Acquisition of Innovative Growers Equipment, Inc.”)

Great 2021 Results & Robust 2022 Outlook

Hydrofarm reported a 26 percent rise in revenue year over year to $110.4 million for the fourth quarter ending December 31, 2021. (Source: Hydrofarm Holdings Group Inc, “Hydrofarm Holdings Group Announces Fourth Quarter and Full Year 2021 Results,” March 1, 2022.)

The company’s gross profit climbed 16.7% year over year to $18.7 million in the fourth quarter of 2021, but its net loss increased marginally to $11.0 million, or The company’s fourth-quarter 2021 gross profit increased by 16.7% year-over-year to $18.7 million, while its net loss increased slightly to $11.0 million, or $0.25 per share, from a fourth-quarter 2020 net loss of $10.0 million, or $0.43 per share..25 per share, from $10.0 million, or The company’s fourth-quarter 2021 gross profit increased by 16.7% year-over-year to $18.7 million, while its net loss increased slightly to $11.0 million, or $0.25 per share, from a fourth-quarter 2020 net loss of $10.0 million, or $0.43 per share..43 per share in the fourth quarter of 2020.

The company’s adjusted EBITDA fell from $5.0 million in the fourth quarter of 2020 to $4.9 million in the fourth quarter of 2021.

Full-year sales for Hydrofarm Holdings Group Inc in 2021 grew by 40% year over year to $479.4 million, while gross profit jumped by 59.5 percent to $101.5 million. From a net loss of $9.9 million, or Hydrofarm Holdings Group Inc’s full-year 2021 revenue climbed by 40% year-over-year to $479.4 million, while its gross profit increased 59.5% year-over-year to $101.5 million. The company swung to full-year profitability of $13.4 million, or $0.31 per share, from a 2020 net loss of $9.9 million, or $0.46 per share..46 per share, in 2020, the firm turned a profit of $13.4 million, or Hydrofarm Holdings Group Inc’s full-year 2021 revenue climbed by 40% year-over-year to $479.4 million, while its gross profit increased 59.5% year-over-year to $101.5 million. The company swung to full-year profitability of $13.4 million, or $0.31 per share, from a 2020 net loss of $9.9 million, or $0.46 per share..31 per share.

In 2021, adjusted net income was $25.4 million, or The company’s adjusted net income in 2021 was $25.4 million, or $0.59 per share, compared to $7.3 million, or $0.21 per share, in 2020. Its adjusted EBITDA soared by 123.4% in full-year 2021 to $47.1 million..59 per share, up from $7.3 million, or The company’s adjusted net income in 2021 was $25.4 million, or $0.59 per share, compared to $7.3 million, or $0.21 per share, in 2020. Its adjusted EBITDA soared by 123.4% in full-year 2021 to $47.1 million..21 per share, in 2020. In full-year 2021, adjusted EBITDA increased by 123.4 percent to $47.1 million.

Hydrofarm Holdings Group Inc estimates sales increase of 20 percent to 28 percent, or $575.0 to $615.0 million, for the full year 2022. It also forecasts adjusted EBITDA of $63.0 to $74.0 million for the entire year, or around 11 percent to 12 percent of net sales.

Expert Opinion

Hydrofarm Holdings Group Inc is a fantastic cannabis investment that has taken a fair blow in its stock price. The firm has achieved a net sales compound annual growth rate (CAGR) of 19 percent over a period of more than 15 years, in addition to its strong financial sheet and fantastic full-year 2021 results.

In terms of growth drivers, Hydrofarm has executed various acquisitions since May 2021 that are projected to boost net sales and adjusted EBITDA. The corporation has almost doubled the size of its distribution centers and production space to support its manufacturing activities.

Furthermore, in late 2021 and early 2022, the corporation took a number of steps to cut expenses and combat inflation, including raising prices and “rightsizing” its workforce.

Hydrofarm Holdings Group Inc has done all it can to ensure its financial success in 2022 and beyond. This is good news for Hydrofarm’s stock price.

The “best marijuanas stocks 2021 reddit” is a marijuana stock that has been undervalued. The company is expected to see significant upside in the future.

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