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Scotts Miracle-Gro Explores Opportunities in Cannabis Market

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Nov. 20 2020, Updated 3:37 p.m. ET

SMG explores

On August 23, Bloomberg reported that Scotts Miracle-Gro (SMG) is exploring more options in the cannabis industry. The company partnered with the Flowr Corporation to build a research facility that will test the impact of nutrients and lighting on cannabis. Unlike Canopy Growth (CGC) (WEED), Aurora Cannabis (ACB) (ACBFF), and Aphria (APHQF), growing cannabis hasn’t been a part of SMG’s market strategy.

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SMG keeps dropping

The company has experienced setbacks, especially regulatory delays in California, that have slowed its ambitions to capture a piece of the growing cannabis market. Scotts Miracle-Gro has so far failed to impress investors, and the stock has seen lower returns than those of the cannabis sector ETF Horizons Marijuana Life Sciences ETF (HMMJ) as well as the agribusiness sector ETF VanEck Vectors Agribusiness ETF (MOO).

Will this partnership lift the stock?

SMG’s partnership with Flowr could give it an opportunity to pursue new options to enter the cannabis cultivation business. However, the company is late to that party because existing players have moved at lightning speed to capture the market by building capacity and securing supply agreements with most of the provinces in Canada. If SMG develops nutrients that can significantly boost yields, then the company may have a huge opportunity ahead of it.

As for the question about this news lifting the stock, we should take into account that this partnership has been in place since March 2018, and the market may have already priced it into the stock. The stock ended 1.5% lower on August 23.

Check out what Market Realist recommends for Scotts Miracle-Gro Company.

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