GrowGeneration Climbs on Analyst Price Target Boost

GrowGeneration receives a price target increase from Oppenheimer, while Stifel starts coverage of the company with a buy rating.
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GrowGeneration  (GRWG) - Get Report was sprouting on Friday after an Oppenheimer analyst boosted his price target for the hydroponic and organic garden retailer following a buy rating initiation from Stifel earlier in the week.

Shares of the Denver-based company were climbing 11% to $16.72.

Oppenheimer analyst Brian Nagel raised his price target on GrowGeneration to $25 from $15, while keeping an outperform rating on the shares.

The analyst, in a note to clients, said GrowGeneration represents a leading, yet still up-and-coming retail chain within the rapidly expanding and dynamic market for hydroponic and organic gardening supplies. 

Nagel added that current multiples under-appreciate meaningfully longer-term prospects for the chain.

On Wednesday, Stifel initiated coverage of GrowGeneration with a buy rating and $22 price target.

Analyst W. Andrew Carter said that he sees the company as a leader in the hydroponics industry and estimates FY22 sales of $362 million, suggesting a 54% revenue CAGR (Compound Aggregate Growth Rate) from the $124 million achieved over the past 12 months. 

The analyst believes the well-positioned GrowGeneration has demonstrated success, free cash flow generation, and the resources for continued reinvestment.

Carter said the shares are currently undervaluing the company's "differentiated growth profile" as the leading specialty retailer of hydroponics, the potential value creation from the ongoing roll-up opportunity, and the scarcity value of pure-play investable opportunities for capitalizing on the growth of the U.S. cannabis category.

Earlier this month, GrowGeneration reported record second-quarter revenue of $43.5 million, with adjusted EBITDA of $4.6 million and net income of $2.6 million.