What happened
Cannabis stock Agrify (AGFY -3.09%) went off on a wild roller-coaster Thursday, plunging double-digits soon after the markets opened, then recouping all of those losses only to tumble 11.1% again by 3:30 p.m. EDT.
It's been one heck of a week for Agrify so far, with an analyst positing a huge price target on Agrify shares, and the stock surging double-digits on August 18 on heavy volumes. Is it a short squeeze? Possibly.
So what
Almost 1.2 million shares of Agrify were held short as of July 30 versus only 0.6 million a month ago. That's the perfect setting for a stock to soar as short-sellers race to exit their positions, driving the stock higher. That's the only reasonable explanation why Agrify shares soared almost 24% on August 18 and is swinging in all directions today. A stock, especially a small-cap stock, is typically volatile on such days.
Image source: Getty Images.
To Agrify's credit, stellar numbers from the company has also driven the stock higher in recent days. Days ago, Agrify reported record second-quarter numbers, including:
- 203% year-over-year growth in revenue to $11.8 million.
- 23% sequential growth in backlog value to $101.1 million.
- Gross profit of $0.5 million.
Agrify's losses widened substantially, but that's expected of a young company trying to gain foothold in its industry. Agrify's core product, Agrify vertical farming units (AVFUs), aims to help cannabis cultivators grow indoor crops. The company also licenses software solutions under subscription plans.
In Q2, Agrify bagged its first customer for its newly-launched service, Total Turn-Key (TTK) Solution that provides end-to-end solutions to customers. It also struck a research and development partnership with integrated pot company Curaleaf Holdings (CURLF -8.64%) in July, and management revealed Agrify is in talks with several other multi-state operators during its second-quarter earnings call.
A strong quarter encouraged an analyst at Maxim to raise his price target on Agrify stock to $40 a share from $22 a share earlier this week.
Now what
I'm wary of stocks targeted by short-sellers or traders, but Agrify is a notable exception. The fact that this company is growing its backlog and revenue backed by a product that's finding takers -- it has already signed a second TTK customer -- is intriguing. I first added the stock on my radar in July and it's surged more than 50% since, but I'm reiterating my view given that management now expects to hit the upper end, even exceed, its full-year revenue guidance of $48 million-$50 million.
