According to the United Nations, the world needs 50% more food by 2050 to support a growing population. However, the agriculture industry currently uses 70% of all freshwater, making that an even more daunting challenge. This outlook raises the possibility of food shortages if we don't change our farming practices.
Hydroponic farming aims to help address this growing food crisis. While it lets water do all the work, hydroponics uses less water than traditional farming. It also uses less space while producing a bigger and faster harvest in any climate. That makes it a potential solution to help stave off a future food crisis.
Here's a closer look at how to invest in hydroponic stocks.
Hydroponic companies to invest in
Hydroponic companies to invest in 2025
The hydroponics industry is growing in importance to the agricultural sector. While many hobby farmers use hydroponics, several large-scale vertical farming companies also use this technique, as do those in the marijuana industry.
However, our focus will be the companies that make and distribute hydroponics products. While it's a small list, those looking at how to invest in the sector have some interesting options.
| Hydroponic Stock | Ticker Symbol | Market Cap | Company Description |
|---|---|---|---|
| GrowGeneration | (NASDAQ:GRWG) | $124.3 million | The largest hydroponics supplier in the U.S. |
| Scotts Miracle-Gro | (NYSE:SMG) | $4.8 billion | One of the world's largest marketers of branded consumer products for lawn and garden care. |
| Hydrofarm Holdings | (NASDAQ:HYFM) | $30.2 million | A leading distributor and manufacturer of controlled environment agricultural equipment and supplies. |
Here's a closer look at these top hydroponic stocks.
1. GrowGeneration
1. GrowGeneration
GrowGeneration is one of the largest retailers and distributors of specialty hydroponic and organic garden products in the U.S. The company had 43 locations in 18 states by the end of 2024's second quarter. Its retail and distribution centers sell organic nutrients and soils, advanced lighting systems, and hydroponic systems for commercial and home growers.
The company has been shrinking its footprint in recent years by closing redundant and underperforming stores. It closed seven retail stores in the first half of 2024. It expected to close another 12 stores in the second half of 2024, reducing its retail footprint to 31 locations. Those closures are part of its strategic plan to streamline its focus on proprietary brands and digital sales. Its restructuring will also help reduce costs and improve its profitability.
GrowGeneration's strategy is starting to work. Proprietary brand sales as a percentage of its net sales in the second quarter of 2024 increased from 16.7% to 21.5%, helping drive an 11.8% increase in net sales to $53.5 million. Meanwhile, its net loss improved by $2.9 million to $5.6 million. With $56 million in cash and no debt, GrowGeneration has a strong financial position and an improving business.
2. Scotts Miracle-Gro
2. Scotts Miracle-Gro
Scotts Miracle-Gro is one of the world's largest marketers of branded products for lawn and garden care. The company makes the Scotts, Miracle-Gro, and Ortho brands. In addition, it owns The Hawthorne Gardening Company, a leading provider of nutrients, lighting, and other materials for the indoor and hydroponic growing industry. The company also owns The Hawthorne Collective, which invests in emerging areas of the cannabis industry.
The company has been working to strengthen Hawthorne in recent years to help it overcome industry challenges. Those actions are starting to pay off.
In its fiscal 2024 third-quarter report, Scotts Miracle-Gro noted that Hawthorne's net sales declined 28% to $67.7 million due to the discontinuation of its third-party distributed brands business. However, net sales of its proprietary signature brands increased 6%, led by growth in lighting and nutrients, and that segment posted its first profitable quarter since the third quarter of fiscal 2022. Hawthorne is on track for break-even or better adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in fiscal 2024, and it's positioning that segment for future growth.
3. Hydrofarm Holdings
3. Hydrofarm Holdings
Hydrofarm Holdings is a major distributor and manufacturer of controlled environment equipment and supplies. Its products include high-intensity grow lights, climate control solutions, and growing media. The company distributes its products to retailers at six locations in the U.S., two in Canada, and one in Europe.
Like many of its competitors, Hydrofarm Holdings has struggled in recent years due to challenging market conditions that led the company to launch a restructuring plan to reduce costs and improve its profitability. This strategy was starting to work by mid-2024. CEO Bill Toler noted that the company delivered positive adjusted EBITDA in the second quarter for the fourth time in the last five quarters, illustrating the effectiveness of its restructuring plan.
The company hopes its efforts will increase utilization and productivity at its remaining factories. While Hydrofarm is dealing with industry headwinds, it is excited about the possibility of a reclassification of cannabis as a less dangerous drug, which could reduce some federal restrictions. That's helping drive its confidence in its "long-term business fundamentals and growth opportunity," Toler said in the second-quarter earnings release.
Fast-growing hydroponic stocks
Fast-growing hydroponic stocks
GenerationGrow, ScottsMiracle-Gro, and Hydrofarm Holdings are all benefiting from the growing demand for hydroponic equipment and supplies due partly to the rise in vertical farming and cannabis growing. All three are leveraging their leading positions to expand their operations and capture a larger share of this fragmented yet growing market. That potentially sets their investors up to earn attractive returns and makes this sector an interesting one to consider.
