The cannabis industry is poised for a boom, and the U.S. is well on its way to legalizing marijuana in some form or another. But even if the U.S. doesn’t legalize marijuana, these two stocks can still soar because of their global growth potential and strong fundamentals.
The penny stock hexo is a cannabis company that has seen its share price increase by more than 3,000% in the last year. It has also been on the radar of many investors due to its potential for growth even if marijuana is not legalized in the U.S.
Over the last six months, cannabis companies have struggled, with the Horizons Marijuana Life Sciences ETF down more than 30% while the S&P 500 has gained by 17%. Despite the fact that excitement was high when the Democrats gained control of the Senate earlier this year, a lack of movement on federal marijuana legalization may have prompted investors to seek for alternative near-term growth possibilities. Despite the fact that the majority of Americans support federal marijuana legalization, it may take years before it occurs.
However, even if the United States government does not legalize marijuana anytime soon, there are certain cannabis companies that may do well. Because pick-and-shovel companies like Agrify (NASDAQ:AGFY) and Scotts Miracle-Gro (NYSE:SMG) don’t touch plants, they don’t need legislation to expand and develop throughout the nation. And, regardless of what happens at the federal level, as more states legalize marijuana, more possibilities will open up for these businesses.
Agrify offers high-quality grow systems that may assist cannabis growers increase efficiency and maximize the value of their goods. Those solutions may be in great demand in a sector where many companies are still losing money. Vertical farming units (VFUs) from the business, for example, enable a producer to grow plants in a vertical configuration, which may save a lot of space and money. An effective solution using VFUs may make it simpler to get started for cannabis companies who are daunted by the requirement for big greenhouse operations.
Agrify is still in its early phases of development, but if their VFUs show to be the genuine thing, this may be a very attractive growth stock to buy. Agrify released its second-quarter statistics on Aug. 12, revealing that revenues of $11.8 million for the period ended June 30 were more than twice those of the previous year. Sales may reach $50 million in 2021, according to management. That would be more than four times its sales of $12 million in 2020.
Despite the fact that the firm is still in the red and will most likely continue to lose money, the company is in excellent condition to expand. Agrify had $79.8 million in cash and cash equivalents at the end of the second quarter, much more than the $13.8 million it spent on operations in the previous six months.
Agrify faces some risk in terms of how popular their VFUs will become among cannabis growers, but it’s a company that investors should keep an eye on.
2. Scotts Miracle-Gro (Scotts Miracle-Gro)
Scotts Miracle-Gro, a hydroponics and gardening business, is a safer pick-and-shovel bet for cannabis investors. Scotts, like Agrify, may assist cannabis growers with their operations. Companies may conserve space and remove the need for a complicated greenhouse by using hydroponics, which includes a system of pumps and pipes that does not need soil. Scotts’ cannabis division is run by its Hawthorne Gardening Company subsidiary, while its U.S. consumer sector, which sells conventional gardening equipment and supplies, is the company’s biggest operational unit. This provides investors with a secure and trustworthy company to invest in, as well as the potential to profit from the cannabis industry’s development.
Last month, Scotts announced the formation of The Hawthorne Collective, a new company that would “concentrate on strategic minority investments in sectors of the cannabis business not presently explored by The Hawthorne Gardening Company.” Scotts is relying on the experience it gained from operating Hawthorne Gardening for many years to find cannabis investment possibilities. Given the company’s stellar performance, it’s easy to understand why management is comfortable directing part of its capital to fresh investment possibilities; Scotts has produced $210 million in free cash flow over the last 12 months. And it has $308 million in cash from operations, despite the fact that many cannabis companies struggle to remain cash flow positive.
The new investment subsidiary will expand possibilities, but the company as a whole isn’t struggling to grow. Hawthorne Gardening’s sales of $421.9 million for the quarter ended July 3 increased by 48 percent year over year. The consumer sector in the United States (lawn and garden) was down 4%, although it was up against some difficult comparables during the early stages of the epidemic, having reached record levels previous year. Overall, the company’s net income increased by more than 11% to $225.9 million over the same time previous year.
Scotts is an obvious choice for those looking for a safer way to invest in the cannabis business. And, with its stock down 27% in the last six months for no apparent reason other than bearishness in the marijuana industry, now may be a good time to get in on the action.
The tlry stock investorplace is a website that provides information on cannabis stocks. It also contains marijuana news and updates.
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