Today, hydroponics company GrowGeneration (NASDAQ:GRWG) is yet the latest victim of earnings season. GRWG stock dropped as much as 12% in earlier trading on Nov. 11 before paring some losses. Currently, GrowGeneration is down approximately 4% from yesterday’s close.
This decline came following earnings that may have been interpreted differently by investors. It was a record quarter for this hydroponics player. And cannabis-related plays, noted for their growth, have been hot commodities in the recent past.
However, the trend has been more bearish for any company associated with the cannabis sector of late. Despite various short-term spikes in value, this sector has been beaten down for a lack of movement on federal cannabis reform in the United States.
Let’s take a look at what other drivers are taking GRWG stock lower today.
GRWG Stock Down on Bottom Line Miss and Outlook
Of course, top-line revenue generation is important. For GrowGeneration, reporting a revenue increase of 111% year-over-year (YOY) to $116 million is a big deal.
However, it appears investors in the cannabis sector also think profitability is important. For this hydroponics player, margins and profits did not appear to meet investors’ standards. The company missed expectations on the bottom line, reporting 7 cents in adjusted earnings per share (EPS). This EPS number was higher than the same quarter last year (6 cents per share). Still, the market was pricing in more substantial growth, looking for an adjusted EPS of 9 cents.
On top of this, GrowGeneration also updated its full-year revenue guidance to between $435 million and $440 million. This was down from the prior of between $440 million and $452 million. The expected consensus was $448.33 million.
In this market, expectations are high. Accordingly, companies that aren’t posting massive beats and outsized upgrades are getting punished. As GRWG stock recovers from this morning’s lows, this is an important factor to consider.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.