Please ensure Javascript is enabled for purposes of website accessibility

Why GrowGeneration Stock Is Sinking Today

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.