7 Worst Vertical Farming and Hydroponic Stocks to Buy

2. GrowGeneration Corp. (NASDAQ:GRWG)

Short % of Float: 5.42%

Number of Hedge Fund Holders: 4

GrowGeneration Corp. (NASDAQ:GRWG) manages one of the largest hydroponic and gardening supply store chains in the United States, primarily catering to the cannabis cultivation industry. The company is undergoing a significant transformation, transitioning from a retail-focused model to a business-to-business (B2B) and proprietary brand-drive approach. This transition, however, has come with major financial and operational hurdles.

GrowGeneration Corp. (NASDAQ:GRWG) faces challenges from decreasing store sales and a restructuring plan that led to 19 store closures in 2024 as it navigates a challenging environment in the hydroponics and gardening sector. The company has been redirecting its focus toward a business-to-business (B2B) model and proprietary brand sales. However, this transition has been accompanied by major near-term financial strain. Inventory write-downs and discounting have majorly led the gross profit margin declining to 16.4% in Q4 ended December 31, 2024, down from 23.5% in the prior year. Although the pace of improvement remains uncertain amid ongoing industry headwinds, management projects the margin to recover by 30% in 2025.

Moreover, GrowGeneration Corp.’s (NASDAQ:GRWG) key strategies involved broadening proprietary brands, such as Chair Coir coco, Ion Lighting, and Drip Hydro nutrients. Sales from these brands contributed 30.4% of Cultivation and Gardening revenue in Q4 2024, a rise from 21.2% a year earlier. However, the company’s shift from retail has affected its overall revenue, which dropped to $37.4 million in Q4. The company’s sales are also struggling with industry-wide demand softness, as store traffic declines and commercial customers shift to e-commerce.

Furthermore, GrowGeneration Corp. (NASDAQ:GRWG) continues to face regulatory uncertainty in the cannabis industry, a core market for its hydroponic business, despite efforts to streamline operations. The company’s forecast for 2025 does not consider the potential federal cannabis policy changes. Nevertheless, the management remains cautious about near-term catalysts.

Thus, the recent transition to an e-commerce and B2B model sparks concerns about the long-term viability of its remaining 31 retail locations, as the management has implied the possibility of further store downsizing if market conditions warrant.

Consequently, investor sentiment remains weak as the company is undergoing structural shifts. As such, GrowGeneration Corp.’s (NASDAQ:GRWG) share price declined by nearly 45% year-to-date, indicating concerns over revenue decline, restructuring costs, and the uncertainty of profitability improvements. This subpar performance places the stock among the worst agriculture stocks for investors seeking stability in the hydroponics sector.