3 Overvalued Cannabis Stocks to Avoid in April

: GRWG | GrowGeneration Corp. News, Ratings, and Charts

GRWG – Despite widespread anticipation of marijuana legalization at the federal level in the United States, an anticipation that has buoyed many cannabis stocks of late, there remain several uncertainties that may limit these companies’ growth prospects. The shares of companies that possess weak financials and shaky fundamentals but are trading at premium valuations could retreat in the near term. So, at this juncture, we think investors should avoid the following names: GrowGeneration Corp. (GRWG), Planet 13 Holdings (PLNHF), and Clever Leaves Holdings (CLVR). They are far from being profitable and now look overvalued. Read on.

The U.S. cannabis market’s prospects look rosy amid anticipation of federal legalization under Biden’s presidency, and with that a potential substantial increase in the consumption of various cannabinoid products for medical and  recreational use. The purchase of adult-use CBD products is expected to increase further because more consumers are seeking these products to deal with anxiety and boredom exacerbated by the COVID-19 pandemic.

Nevertheless, the cannabis industry will still have to clear many hurdles before seeing full-scale legalization. Although the likelihood of pot legalization has vastly improved, the U.S. economy is still tackling the pandemic, which could delay legalization plans. While most pot stocks are currently trading at high prices, driven by the legalization hype, not all the companies possess sufficiently strong fundamentals and cash positions to justify their valuations.

Against this backdrop, we think investors should avoid GrowGeneration Corp. (GRWG), Planet 13 Holdings Inc. (PLNHF), and Clever Leaves Holdings Inc. (CLVR). Their  weak fundamentals and slower growth prospects don’t justify their current valuations.

GrowGeneration Corp. (GRWG)

Formerly known as Easylife Corp., GRWG operates organic gardening and retail hydroponic stores in the United States. The company distributes  products such as lighting fixtures, nutrients, seeds and growing media, systems, trays, fans, filters, and other hydroponics products. It operates a chain of 51 stores and an online ecommerce store.

Last month, CRWG appointed Jeffrey Lasher, as Chief Financial Officer, effective April 15, following the retirement of Monty Lamirato. His extensive knowledge in multi-store and omni-channel operations could help drive  GRWG’s growth as it expands its business strategically.

Also, last month, GRWG acquired Agron.io, a leading wholesale agriculture platform. The move will allow it to be a one-stop destination for GRWG’s growing commercial clients across the U.S.  The strategic acquisition is expected to add to the company’s portfolio and offer a more customized experience to its commercial customers.

Although GRWG’s revenue has increased 143% year-over-year to $193 million in the year ended December 31, 2020, the company’s gross profit margin for full-year was 26.4%, compared to 27.6% in the same period last year. Its total operating expenses rose 108.7% year-over-year to $42.61 million, while its interest income declined 69.6% from its year-ago value to $43.93 thousand.

The stock has gained 25.1% over the past month, but it is currently trading 25.8% below its 52-week high of $67.75, indicating short-term bearishness. Also, GRWG has a stretched valuation. Its forward non-GAAP p/e currently stands at 103.16x, 434.5 % higher than the industry average 19.30x. In fact, its trailing-12-month ev/ebit  of 321.99x is 1447.5% higher than the industry average of 20.81x.

GRWG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which translates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

GRWG has a C grade for Sentiment, D for Stability, and an F for Value. Of the 64-stocks in the A-rated Home Improvement & Goods industry, it is ranked #64.

In addition to the POWR Ratings grades we’ve  just highlighted, one can see the GRWG ratings for Quality, Momentum, and Growth.

Planet 13 Holdings Inc. (PLNHF)

Headquartered in Las Vegas, Nevada, cannabis retailer PLNHF produces, cultivates and markets cannabis and cannabis-infused products for the medical and retail cannabis markets in the United States. In addition,  the company operates dispensaries and offers cardholder process navigation services, patient education services, express services, and home delivery services.

Last month, PLNHF reported that its unique in-house award-winning brands are now available in 53 dispensaries in Nevada, including the SuperStore. As the demand for its owned brands continues to rise, this development should provide better access to its customers across Nevada.

PLNHF’s total operating expenses increased 13.1% year-over-year to $8 million in the fourth quarter ended December 31, 2020. Its gross profit declined 2.5% from the year-ago value to $8.87 million. The company reported a net loss of $2.9 million and a loss per share of $0.02 over this period. It generated a total operating loss of $700,724.

Over the past month, PLNHF has gained 5.7%. However, it is currently trading 20% below its 52-week high of $8.67. Also,  the stock appears to be extremely overvalued currently. In terms of its trailing-12-month ev/ebitda , PLNHF is currently trading at 202.92x, 871% higher than the industry average 20.90x.

PLNHF’s weak prospects are apparent in its POWR Ratings also. It has a D grade for Stability and Value, and a C for Quality. In the A-rated Tobacco industry, the stock is ranked #10 of 11 stocks.

To see additional POWR Ratings for Growth, Sentiment, and Momentum for PLNHF, click here.

Clever Leaves Holdings Inc. (CLVR)

Incorporated in 2017, CLVR produces, cultivates, and sells pharmaceutical-grade cannabinoids in the United States, Colombia, Germany, Portugal and Canada. The company is also involved in the manufacturing and selling of homeopathic and other natural remedies, wellness products, and nutraceuticals.

This month, the company entered a collaboration with Verdemed Holdings Inc. to supply EU-GMP and INVIMA certified products to the Brazilian and Peruvian markets. The partnership should expand CLVR’s presence in one of the largest South American markets and allow it to offer high-quality products to its growing user base.

During the fourth quarter, ended December 31, 2020, CLVR’s revenue increased 28% year-over-year to $3.3 million. However, it reported an operating loss of $7.32 million and a net loss of $11.62 million. It also reported an adjusted ebitda loss of $6.3 million over this period.

The stock has declined 10.4% over the past month and is currently trading 46.8% below its 52-week high of $19.46, indicating short-term bearishness.

CLVR’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall rating of F, which equates to a Strong Sell in our POWR Ratings system. CLVR has a C grade both for Growth and Momentum, a D for Value, and an F for Stability. In the C-rated Agriculture industry, the stock is ranked #29 of 30 stocks.

In total, we rate CLVR on eight different components. Beyond what we stated above we have also given CLVR grades for Quality, and Sentiment. Get all the CLVR ratings here.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Want More Great Investing Ideas?

“MUST OWN” Growth Stocks for 2021

How to Ride the NEW Stock Bubble?

5 WINNING Stocks Chart Patterns

Unlock the POWR in Your Portfolio!

 


GRWG shares were trading at $49.91 per share on Wednesday morning, down $0.34 (-0.68%). Year-to-date, GRWG has gained 24.09%, versus a 9.07% rise in the benchmark S&P 500 index during the same period.


About the Author: Imon Ghosh


Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
GRWGGet RatingGet RatingGet Rating
PLNHFGet RatingGet RatingGet Rating
CLVRGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Bull Run or Bull S#*t?

The S&P 500 (SPY) has impressively broken out above 4,000. However, it seems that ONLY large caps are moving higher while smaller stocks are actually in the red. Why is this? And what does it mean for the future health of this bull market? Read on below for the answers…

:  |  News, Ratings, and Charts

3 Shipping Stocks Rated Strong Buy

Shipping stocks are buoyant as the global economy begins its rebound from the economic effects of the COVID-19 pandemic. We think ZIM Integrated Shipping Services (ZIM), Matson (MATX) and Global Ship Lease (GSL) are three companies that are well positioned to benefit from a sector resurgence and, as such, warrant a closer look now by investors. Let’s evaluate these names more closely.

:  |  News, Ratings, and Charts

Top 10 Growth Stocks

Let me prove beyond a shadow of a doubt that we are in the midst of a stock market bubble. Even better, let me explain why stocks (SPY) will rise for another 12-24 months so you can ride it higher and then parachute out at the peak. And just for good measure I will share my top 10 stocks for today’s market. Read on below for more...

:  |  News, Ratings, and Charts

Avoid These 3 Cathie Wood Stocks in April

Cathie Wood’s contrarian investment strategy may not be ideal for short-term, risk-averse investors with limited funds because most of Wood’s bets require a considerable holding period. So, we think Wood favorites Shopify (SHOP), Spotify (SPOT), and Zillow (Z), which could witness a pullback in the near term, are best avoided now.

:  |  News, Ratings, and Charts

Top 10 Growth Stocks

Let me prove beyond a shadow of a doubt that we are in the midst of a stock market bubble. Even better, let me explain why stocks (SPY) will rise for another 12-24 months so you can ride it higher and then parachute out at the peak. And just for good measure I will share my top 10 stocks for today’s market. Read on below for more...

Read More Stories

More GrowGeneration Corp. (GRWG) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All GRWG News