AeroGrow International: A Bargain at Under $5

Green thumb envy

On my way to work, through a second story window of a lovely old rowhouse, I have glimpsed disembodied hands gently tending overflowing herbs sprouting from a futuristic black planter with a bright grow lamp.

I’ve tried to sow vegetables from seed indoors. Right now, in fact, I’m working on peppers. After about nine weeks, I’ve resigned myself to the fact that the single remaining scraggly one-inch-high plant will never make it to the potting stage.

Why? Apparently because I don’t have what my fellow city dweller has… an AeroGarden, made by AeroGrow International, Inc. (AERO).

A rainforest in your kitchen

The technology behind the space-age design involves no soil. Instead, the seed pods, which one also purchases from the company, take root in a chamber with fertilized water and nutrients programmed to wash over them under a lamp that automatically adjusts the light for optimum growth.

You can harvest herbs, salad greens, vegetables, and flowers – and all are said to grow approximately twice as fast as seeds planted in the usual dirt.

The company has clearly done all it can to make AeroGarden idiot-proof. As John Thompson, AeroGrow’s marketing director explains it, “We kept building the best system we could, watched how people would kill their plants, and changed it so they couldn’t kill their plants that way any more.”

And looking over AeroGarden reviews, the majority of customers are clearly happy with this product – heck, look long enough and it resembles a cult. There are dedicated forums where owners delightfully recount their most productive herbs or their cherry tomato plant output. If you search AeroGarden on YouTube, you’ll see tons of video postings from people filming the progress of their plants.

Organic marketing

Launched in March 2006 and catering to those weary of food dowsed with pesticides and chemicals, AeroGrow made the most of the hunger for organically-grown veggies and herbs (pun intended).

Just run a search for AeroGarden – you can purchase it at Amazon.com, Macy’s, Williams-Sonoma, Linens ‘n Things, Sears, QVC, Target, and tons of home and garden websites.

The cost? About $150. The seed packets run you about $20.

Even the few listings on resale sites aren’t cheap and they go FAST.

In June of last year, AeroGrow issued their first catalog, resulting in record sales – much of it repeat as customers order their next batch of seeds or new parts for their systems.

Stability and growth

As popular as this product is, this Boulder, Colorado-based company has just announced an expanded product line focusing on newly designed gardens – with price points from $99 to $229.

Hoping to tap into the home and office décor market, they have created sleeker models that will feature flowers.

Another new product is smaller design of the traditional garden for those with tiny kitchens (like me!).

This should broaden their profit base considerably.

Globally, AeroGrow broke into the Japanese and European markets last year and announced expansion into South Korea this past February.

Insiders have faith

Founded by an experienced entrepreneur, AeroGrow became publicly traded in February of 2006 and debuted on the Nasdaq in June of 2007.

In the forth quarter of 2007, revenues came in at over 14 million – 201% over the same quarter the year prior.

Most compelling for those interested in bargain stocks are the actions of AeroGrow insiders: Since 2006, each transaction made has been a buy.

That’s right… not one sale of shares is recorded.

Right now, the stock price is rebounding from a 52 week low hit on March 20.

I recommend you buy shares of AeroGrow International, Inc. (NASDAQ) at or under the bargain price of $5.00.

Disclosure: None

Comments

[CoverMe]

Down 19% today... once it broke through $3 it plummeted. So much for March, now there's a whole new all-time low.

The Aero Garden might be a great product, I don't know. (I was given one for Christmas, but I haven't taken it out of the box yet) In my opinion, the greatness of the product doesn't have much to do with whether a stock is a good investment... just as money can be made on the stocks of companies that produce inferior products. It makes absolutely no difference if I believe something is a good product, the market at large moves the stocks and I can only hope to ride the train.

Finally, I'm unconvinced by the fact that insider trading only reveals "buys"... the world is full of people who believe STRONGLY in their ideas, but it doesn't mean I need to throw money at them.

The stock continues to trend downward, with notable tanks (today), earnings are projected to be negative for Q1 and Q2... not exactly a "Seeking Alpha" sort of a play... more of a "Seeking the Basement" sort of stock.

[hightechtoys]

Is 2.50 the bottom?

[Stephjen]

as an avid gardener, i'd love to have one... but it's really just an expensive toy.

for an afternoon of work and $50 (TOPS), a suburbanite could plant a full garden. (obviously, someone living in a high-rise doesn't have the same luxury).

However, at $150 initial cost and super expensive seeds, any real monetary gains usually enjoyed when gardening are nullified.

So, it's a nice toy, but not a revolutionary product. as we're almost in/entering/in/emergin... from a recession, who's going to spend $200 for a tabletop garden?

[paultaut]

I'll look at the 3-5 year charts.

It could turn into a fad...beanie baby style...gotta have one...

[aflitzy]

Would be interesting if the company sent shareholders a coupon for 1/2 off a system. Would increase market share.

[taxd2deth]

First, this gadget competes with many established gadgets that do the same for less one way or the other. Second, repeat business will possibly prove quite sparse (one trick pony). Cf. Gardener's supply for similar. More importantly, this is going to be tried by everyone who can get seeds of a hemp plant, isn't that obvious? People don't really sit around growing tomatoes in solution, and an "unsavory"..... will follow. They can embrace it and profit or keep making believe that isn't their target market. You might expand your article to discuss that most critical segment; however if it does grow killer stuff, then they have something; if not, it's one trick for sure. PS> drugs are wrong, wrong, wrong, never ever do drugs/alcohol while investing.

[Jae Jun]

I agree with taxd2deth. The product is either a hit or miss. So far they are doing a really good job of getting out there and getting their brand known but it could end up like many other kitchen appliances.

However, I like the idea and how this is completely unique. I did further research which you can read at www.oldschoolvalue.com...

[RUKIDDINGME]

Bargain Price....? Maybe at 50 cents? Huge quality issues, and competition for the first time is on the horizon. Mgmt is questionable.

[hightechtoys]

when do they report earnings?

[secmaven]

The gross margin is more than consumed by G & A. If the insiders who own stock would wake up and cut their salaries so the company could report earnings then and only then will this stock move to the upside.

[1000pluspercentgains]

I think earnings will be not be that bad. One thing I was wondering was how they could sell their product in the summer time when most people garden outdoors. Then, I noticed they were marketing in Australia where it's winter time during summer time in America. Also, there's still plenty of people who live in apartments with no room outside to garden. I don't think sales will slow at all in the next few months and AERO will easily be $10 by the end of summer.

[Kill_It]

its a really interesting stock, i've been following it for quite a while just as a good case study in a up and comming growth company with a unique product. I've also been thinking about it in terms of Warren Buffet's durable competitive advantage. If it has strong patents on any of this technology ( i realize hydroponics isn't exatly new but..) and they could expand this to a large or even commercial scale then this could be big. I might be worth dropping a small investment on for a long term speculative play.

[hightechtoys]

What do you make of this recent funding announcement: money.cnn.com/news/new...

[hightechtoys]

It looks like they got some good funding for an expansion. Nice to see a major institution has faith in this promising company.

[Suziaeroinvestor]

I have 6 aero gardens in the house. The upside is that I have used them over and over for so many reasons. The downside is that I've been replacing pumps lately and right now need pumps, lights, filters, plant seeds the works. I am also an investor in this company. So far I have 101 stocks and buy more every 2 weeks. I have spoke with employees on the phone and they have shared all the great tests and experiments they have done. I knew about all their recent products a long time ago. They are covering their bases by expanding into as many uses as they can and working to become a household name before a lot of the other competitors do. I've also bought over 2 grand worth of competitor products that are meant for commercial businesses. They all have their good and bad points.

As a consumer I'm a little on the fence. I don't know if they are that much better than just putting the seeds in dirt. But I like the way they look and the way they hang on the wall more than anything I could come up with on my own. I believe they will do just fine.

I also think the person saying that the product is wrong because some might grow hemp weed in it is off his rocker. Give me a freaking aspirin. A person can and will grow that crap in anything, normal pots...no pun intended. So what are we to just rail against the entire gardening industry because of a few bad weeds? Pun intended LOL!

Suzi

[1000pluspercentgains]

It looks like their annual report comes out in 2 days.