What happened
Shares of Agrify (AGFY 0.40%) popped today, rocketing as high as 19.5% in the first hour of trading before cooling off a bit to end the day up 8.3%. Agrify received its first-ever buy rating from an analyst, and it was enough to send the indoor cannabis grow solutions stock shooting through the roof.
If you haven't heard about Agrify stock, that's probably because the company became public only earlier this year through an IPO.
So what
On Friday, a Craig-Hallum analyst initiated coverage of Agrify stock and put a buy rating on it with a price target of $25 a share. That represented nearly 37% upside from the stock's closing price on Thursday.
The analyst is optimistic about Agrify's prospects as it expands its product offerings and builds its cash balance, and he believes the company's software-as-a-service (SaaS) revenue could more than double by 2025.
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Agrify provides indoor grow solutions including equipment that can be used by cannabis cultivators. Its core product is Agrify vertical farming units (AVFUs), or modular compartmentalized units to grow indoor crops.
Importantly, Agrify also licenses software solutions in a bundled package to AVFU customers under a subscription-based model, and can therefore generate recurring revenue in the form of monthly fees for its software. In March, Agrify also launched Total Turn-Key Solution to provide customers with end-to-end solutions, right from funding and construction services to equipment, software, data, and maintenance support.
This past May, Agrify released its first earnings report as a public company. Its revenue grew a stunning 600% to $7 million during the quarter ended March 31, and sales backlog increased 39% sequentially to $82 million. Thanks to the strong backlog growth, management upped its full-year revenue target to $48 million to $50 million from its previously guided level of $40 million.
Now what
Agrify is in the early stages of growth, so profitability could be far away as the company focuses on expanding its customer base and growing its top line. Earlier in July, it struck a research and development partnership with Curaleaf Holdings, a rapidly growing vertically integrated cannabis company.
With the indoor farming market projected to grow rapidly, Agrify's business -- particularly its recurring-revenue offerings -- looks promising. That makes it a stock investors interested in marijuana may want to add to their radar.
