GrowGeneration Corp

GrowGeneration Corp. (NASDAQ: GRWG) is a developer, marketer, retailer, and distributor of products for both indoor and outdoor hydroponic and organic gardening. The Company is a marketer and distributor of nutrients, growing media, lighting, ventilation systems and other products for hydroponic and organic gardening. The Company operates through two major lines of business: the Cultivation and Gardening segment, composed of the Company's hydroponic and organic gardening business; and its Storage Solutions segment, composed of the Company's benching, racking, and storage solutions business.

Recent Financial and Business Updates:

Fourth Quarter 2023 Performance Review: During the fourth quarter of 2023, there were notable shifts in key financial metrics compared to the previous year. Net revenues experienced a decline of approximately 9%, amounting to USD 49.5 million, with a corresponding decrease in same-store sales of 3.6%. However, despite the decrease in net revenues, gross profit increased to USD 11.6 million, representing 23.5% of net revenues, compared to USD 9.6 million, or 17.6% of net revenues, in the same period the prior year. Conversely, there was a significant net loss of USD 27.3 million, or USD (0.44) per diluted share, compared to a net loss of USD 15.0 million, or USD (0.25) per diluted share, primarily attributed to non-cash impairment. Additionally, Adjusted EBITDA showed improvement, reporting a loss of USD 3.7 million compared to a loss of USD 10.2 million in the fourth quarter of 2022.

Full Year 2023 Financial Highlights: For the full year 2023, the company experienced a decline in net revenues by approximately 18.8%, totaling USD 225.9 million, surpassing the company’s previous guidance. Despite the decrease in net revenues, gross profit decreased to USD 61.3 million, or 27.1% of net revenues, from USD 70.3 million, or 25.3% of net revenues, in the prior year. The net loss for the full year amounted to USD 46.5 million, or USD (0.76) per diluted share, compared to a net loss of USD 163.7 million, or USD (2.69) per diluted share, in the previous year. Adjusted EBITDA for the full year 2023 reported a loss of USD 5.6 million, contrasting with earnings of USD 16.7 million in the prior year. The reduction in operating expense and selling, general, and administrative expense base by approximately USD 13.6 million contributed to these results.

Operating Segment Realignment: In the fourth quarter of 2023, the company restructured its operating and reportable segments to align with changes in its operating model and management structure. This realignment led to the identification of two operating segments: the Cultivation and Gardening segment and the Storage Solutions segment, each representing major lines of business. This adjustment aims to align with the decision-making process of the Chief Executive Officer and improve internal reporting efficiency.

Consolidated Results for Fourth Quarter 2023: During the fourth quarter of 2023, net revenues decreased by USD 5.0 million, or 9%, compared to the same period in 2022. However, gross profit increased to USD 11.6 million, reflecting an improvement of USD 2.1 million from the fourth quarter of 2022. The increase in the gross profit margin to 23.5% was primarily due to enhancements in product mix and margin performance. Despite these improvements, there was a significant GAAP net loss of USD 27.3 million, attributed to a non-cash impairment of goodwill and intangible assets. Adjusted EBITDA also improved, reporting a loss of USD 3.7 million compared to a loss of USD 10.2 million in the fourth quarter of 2022.

Outlook for First Quarter and Full Year 2024: Looking ahead to the first quarter and full year 2024, the company anticipates net revenues in the range of USD 45 million to USD 48 million and USD 205 million to USD 215 million, respectively. Adjusted EBITDA for the full year is projected to range from a loss of USD 2 million to a profit of USD 3 million. Additionally, for the first quarter, Adjusted EBITDA is expected to range from a loss of USD 1 million to USD 3 million. Furthermore, the company is exploring strategic opportunities for its benching, racking, and storage solutions business, MMI, acquired in late 2021, constituting the Storage Solutions segment. 

Technical Observation (on the daily chart)

Presently, the stock has corrected by approximately 43.64% since reaching its highest point in the past 52 weeks, which occurred on May 11, 2023. The Relative Strength Index (RSI) over a 14-day period stands at 57.07, recovering from overbought zone, indicating a state of potential consolidation or a short-term downward momentum. Additionally, the stock's current positioning is above both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term support levels. Furthermore, the price is currently near an important support zone of USD 2.30 -USD 2.50.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Watch’ rating has been given to GrowGeneration Corp. (NASDAQ: GRWG) at the current market price of USD 2.78 as of April 08, 2024, at 07:25 am PDT. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is April 08, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’