The hydroponics market has been up and down over the last several years as it has attracted fad stock buyers who are looking for the next meme inspired YOLO trade. We are looking at sustained growth from Hydrofarm as the company is one of the leaders in the hydroponic market.
Revenue increased from $211.81 million in 2018 to $342.21 million last year. That expansion continues today, with revenue in the first half of 2021 totaling $245.19 million. That represents an increase of 55.1% over the $158.11 million generated the same time a year earlier.
The cannabis market has a compelling growth story. According to reports, the US cannabis market was worth $12.2 billion in 2019. The cannabis market is expected to grow to 31.1 billion by 2024 — a 21% annualized growth rate. The expansion in Canada is expected to be even greater at 30% per year, taking it from $1.7 billion to $6.2 billion over the same period of time. Another driver for the company is the US hemp market. This is expected to climb from $1.2 billion in 2019 to $6.9 billion in 2025, working out to an annualized growth rate of 33.8%. Collectively, this niche of the agricultural market is expected to take the CEA space from $65 billion in 2019 to $117.7 billion in 2023. That works out to an annualized growth rate of 16%.
HYFM is well off its high of around $95/share. Obviously, the stock was over hyped and has fallen significantly since its high. Getting an accurate valuation on HYFM remains difficult because it lacks many peers in its business (another argument for the bull case). We are watching the valuation of this company closely as it continues to grow earnings and benefit from the continued growth in the Cannabis market.
Recommendation Accumulate Stock Long-term Investment Horizon
I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. Clean Food Tech staff wrote this article, and it expresses our opinions. We not receiving compensation for this article and we have no business relationship with any company whose stock is mentioned.
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