September was a bad month for the stock market. The S&P 500 fell 4.8%, bringing its year-to-date returns down to less than 15%. Many of the stocks that have been struggling lately are those of growth companies, some of which still have some exciting long-term potential.
Both GrowGeneration (GRWG 0.95%) and fuboTV (FUBO +0.00%) cratered more than 20% during the past month, and now may be as good a time as any to add them to your portfolio.
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1. GrowGeneration
Hydroponics company GrowGeneration was destined to come down in value; last year, its shares skyrocketed 881% while the S&P 500 rose just 16%. The business is an attractive one to invest in because it benefits from the cannabis sector's growth and it trades on a major exchange (U.S.-based pot stocks can't do the same due to the federal ban on marijuana).
It gives investors a terrific way to gain some exposure to the sector. And the dip in price may not end up lasting. That's for the simple reason that as the cannabis industry gets bigger, more growers will be looking for efficient solutions (hydroponics takes up less space than a conventional greenhouse and doesn't even require soil). Two attractive recreational cannabis markets that will soon be open for business, likely within the next 12 months, are New York and New Jersey. And significant marijuana reform may not be far away, paving the way for even more companies to get into the industry.
For now, GrowGeneration's business is just fine and growing at an incredible rate. During the period ending June 30, its sales of $125.9 million soared an incredible 190% year over year. And unlike many businesses in the sector, its operations are profitable. Net income of $6.7 million rose by 161%.
GrowGeneration is doing so well the company raised its guidance, again. For 2021, it projects revenue to fall between $455 million and $475 million. That was an upgrade from the previous quarter where GrowGeneration also boosted its full-year guidance to a range of $450 million and $475 million.
"Grow" is certainly fitting in GrowGeneration's name. This could be a top stock to own for several years, at least while the marijuana industry is expanding and getting larger. You have to go back to November 2020 for the last time the stock traded this low.
2. fuboTV
Streaming company fuboTV is also coming off a stellar 2020 when its shares popped 214%. The stock is a bit of a riskier buy than GrowGeneration because it's still reporting losses. Over the trailing 12 months, its losses have totaled $607 million -- more than its revenue of $417 million.
The big risk with fuboTV is that it is also burning through loads of money -- $194 million over the past year. That's close to half of its cash and cash equivalents balance ($407 million). For investors, that presents a dilution risk, especially as the company continues growing and its need for cash will inevitably increase.
But if you're willing to hang on long enough, fuboTV could still be a worthwhile stock to buy and hold. The business is generating phenomenal growth numbers: Revenue of $130.9 million for the period ending June 30 grew 196%, advertising revenue was up 281%, and average revenue per user increased by 30%. Its subscriber base totaled 681,721 in the second quarter, for a year-over-year jump of 138%. And it plans to continue building on those numbers, forecasting revenue to potentially top $144 million next quarter and total subscribers hitting 820,000.
fuboTV is chasing more than just growth in streaming. In March, the company completed the acquisition of sportsbook company Vigtory as a way to tap into the sports betting market. Like marijuana, this is an industry that is growing in size as more states permit it. The company plans to launch its Fubo Sportsbook before the end of the year.
The company has no shortage of growth opportunities to pursue right now, and fuboTV is definitely an exciting stock to own. While it may be a bumpy ride, it could be a good pick-up right now -- earlier this year, its shares were trading at nearly triple the price they are now.
