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Growlife, Inc. (PHOT): As Real As It Gets!

Feb. 09, 2014 4:41 PM ETD
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I would like to preface this article by stating that I am a relatively seasoned personal investor who has extensive experience trading large-cap stocks. Let me just say that 2013 was a great year. My strategy has always been to long stocks. I have also never worked in the finance industry, owned or worked for a hedge or a mutual fund. However, I wanted to take the opportunity in 2014 and dabble in the penny stocks this year, and have done some extensive research on these companies. I spent a lot of time reviewing forums, and doing technical analysis on penny stocks. With all the news regarding the medicinal use and the decriminalization of marijuana (MJ) use, I decided to check into the companies that are plays in the MJ industry. One company that stuck out to me was Growlife, Inc. (ticker PHOT). With this newfound knowledge, I decided to do my own due diligence to see what this company was all about.

Going forward with any penny stock, I concern\ myself with the actual existence of these companies. Was I going to get burned by any of these companies? If I buy the shares, will I lose all my investment within days? What kind of scams are out there? All these questions cause me to be very conservative when it comes to investing. Then I come across this company Growlife Inc., and I started getting excited.

In recent years, I have started my own home hydroponic gardening system. Given that I reside in the cold northeast, our growing season does not last long, and one thing I love is fresh vegetables, and hydroponics has made me with my goal of fresh veggies during the long, cold winter. Then, I come across Growlife, and I fully understand their product lines. The MJ industry is definitely a new venture in Growlife's already established business.

Reading forums, blogs, and other non-Growlife sanctioned articles, I wanted to take this article and use it for education purposes about who Growlife actually is, and provide my educated opinions of the future of Growlife.

Growlife is a major player in the hydroponics industry. Through mergers and acquisitions, they have many locations within the United States. Their Growlife Hydroponics operating unit has land-based locations based in California, Colorado, Maine, Massachusetts and New Hampshire, in addition to online retail, which all sell a complete line of hydroponics equipment and supplies, including many products that they produce internally to their company, including the Phototron hydroponic system, which is an innovate product line. Growlife has positioned itself properly in the hydroponics industry.

As mentioned earlier, in my opinion, the MJ industry is an up-and-coming industry for Growlife. They are positioning themselves effectively for an industry in which there is synergy between the products they presently have and the tools that are required to grow Marijuana. I expect to see revenue to increase exponentially. If you consider the not-so-distant future with the growth of the industry, Growlife is a slam dunk when it comes to being successful in the MJ industry.

The facts we know is that 20 states and the District of Columbia have already approved the legal use of medicinal cannabis, with many states still under consideration. Colorado and Washington State have legalized the recreational use of cannabis, with Colorado seeing exponential growth in tax revenue as of January 1st, 2014. We will see similar growth in Washington State over the early summer months. Many, if not all states will follow suit. In Colorado alone, a state with a population of just over 5 million people has seen nearly $9 million in tax revenue from medicinal cannabis use based on over $300 million in revenues in the most recent fiscal year (2012-2013). Expect that number to triple or quadruple with the implementation of recreational use that is taxed at a much higher rate. Washington State has a population of nearly 7 million, we can most certainly anticipate tax revenues to be even higher for these states. This year, the voters in State of California (population around 38 million) will be voting on recreational use as well.

What does all this mean? The MJ industry is going to explode! And, Growlife has positioned themselves to be an equipment supplier for the industry and get a significant piece of that action. They have made partnerships and acquisitions that will grow their company exponentially this year and in the coming years. Growlife is involved in the world's largest marijuana growing facility, and will see exponential growth from this deal as well.

Financially, they have positioned themselves to be able to finance that growth with the authorization of 2 billion additional shares. According to notes from the February 7th meeting of shareholders, these authorized shares will only be used when the opportunity to finance grow arises. In my opinion, I would not worry about dilution occurring, as the growth of Growlife in the next year and coming years will overcompensate for any dilution that would occur. I trust that Sterling Scott, and the other executives of Growlife will do what is right by the shareholders and the Company.

Yes, Growlife is as real as it gets in this new growth industry.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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