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Why GrowGeneration Stock Is Sinking Today

By Keith Speights – Aug 20, 2020 at 12:00PM

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Traders may be profit-taking after a remarkable run-up in the share price.

What happened

Shares of GrowGeneration (GRWG 11.33%) were down by 13.4% as of 11:51 a.m. EDT on Thursday. The specialty hydroponic and organic gardening retailer didn't report any news that would justify the drop, so the most likely reason for it is that some investors are taking profits off the table following the stock's big jump over the last few days.

So what

GrowGeneration announced spectacular second-quarter results last week, posting all-time high revenues and earnings. It also provided optimistic guidance for the rest of the year and for 2021.

Cannabis leaf in front of a globe showing North America

Image source: Getty Images.

It should come as no surprise that the picks-and-shovels cannabis company's stock skyrocketed after such a great report. From the point after it delivered its Q2 update before the bell on Aug. 13 through the market close on Wednesday, GrowGeneration's shares rose by about 151%.

However, it should also come as no surprise that such a huge short-term jump would prompt some investors to cash in. When enough of those profit-taking investors begin selling, it can create downward pressure on share prices -- and that's what appears to be happening to GrowGeneration today.

Now what

This company's long-term prospects aren't changed one bit by the volatility in its share price. The U.S. cannabis industry is still in an early stage, and GrowGeneration is poised to continue expanding to support its ever-increasing needs for gardening supplies. The main thing for investors to watch here is how well the company executes on its strategy.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends GrowGeneration. The Motley Fool has a disclosure policy.

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GrowGeneration Corp Stock Quote
GrowGeneration Corp
GRWG
$6.19 (11.33%) $0.63

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