Why Agrify cannabis stock increased 19.5% today
Actions of Agrify (NASDAQ: AGFY) erupted today, hitting 19.5% in the first hour of trading before calming down a bit to end the day up 8.3%. Agrify received its very first buy note from an analyst, and that was enough to explode the stock of indoor cannabis growing solutions.
If you haven’t heard of Agrify shares, it’s probably because the company only went public earlier this year thanks to an IPO.
On Friday, a Craig-Hallum analyst launched a hedge of Agrify shares and gave it a buy rating with a price target of $ 25 per share. This was almost 37% up from the stock’s closing price on Thursday.
Analyst is optimistic about Agrify’s prospects as it expands product offering and strengthens cash balance, and believes the company’s software as a service (SaaS) revenue could more than double by 2025.
Agrify provides indoor growing solutions, including equipment that can be used by cannabis growers. Its flagship product are the Agrify vertical agricultural units (AVFU), or modular compartmentalized units for growing indoor crops.
It is important to note that Agrify also licenses software solutions in a bundle package to AVFU customers under a subscription model, and therefore can 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, ranging from financing and construction services to equipment, software, data and maintenance support.
Last May, Agrify published its first report on results as a public company. Its revenue increased 600% to $ 7 million in the quarter ended March 31, and its backlog increased 39% sequentially to $ 82 million. With strong backlog growth, management has raised its annual revenue target from $ 48 million to $ 50 million from its previously forecast level of $ 40 million.
Agrify is in the early stages of its growth, so profitability could be distant as the company focuses on expanding its customer base and growing its revenue. Earlier in July, it entered into a research and development partnership with Curaleaf Holdings, a rapidly growing vertically integrated cannabis company.
With the indoor farming market expected to grow rapidly, Agrify’s business – particularly its recurring revenue offerings – looks promising. That makes it a stock that investors interested in marijuana may want to add to their radar.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.