As the global population rises, farmers will need to keep up with food supply to avoid shortages. This is leading to investors searching for the Best Vertical Farming Stocks.
Innovators and planet lovers use science to address these issues and create a sustainable world. One such issue is food sustainability and innovators have come up with an efficient solution – vertical farming. This technology grows plants in vertical stacks in an indoor environment under powerful LED lights using nutrient-rich water.
Why is Vertical Farming a Good Investment?
As vertical farming uses an artificial environment, it is unaffected by weather conditions or soil quality. Hence, you can produce vegetables and fruits near the area of consumption. This will reduce logistic costs (the main cause of high food prices) and food wastage. (Fact: 25-30% of vegetables go bad during transit.) Vertical farming reduces transit time and gives consumers nutrient-rich fresh food.
Vertical farming ticks all boxes where traditional farming lags; lower water and land use, lower use of pesticides, no dependence on weather, reduced food miles, you can grow as much as you want. This technology helps address ESG concerns and has significant growth potential over the long term. Allied Market Research forecasts the vertical farming market to grow at a compounded annual rate of 22.9% by 2030.
Best Vertical Farming Stocks for 2023
However, vertical farming is still in the nascent stage. So you won’t find big players, just startups that have not yet gone public, small-cap stocks, or cannabis stocks. But these players are in a hyper-growth stage. Venture capital funding in this technology doubled to US$900 million in 2020. The pandemic slowed things down, but the growth has resumed. You can be an early investor in the future of farming and tap this hyper-growth with these three vertical farming stocks:
1. Hydrofarm Holdings (NASDAQ: HYFM)
- Ticker: HYFM
- Dividend Yield: N/A
- Market Cap: $64.86 Million
Founded in 1977, Hydrofarm Holdings is a hydroponics equipment manufacturer with a US$64.86 million market cap. The company supplies grow lights, climate control solutions, grow media and nutrients for Controlled Environment Agriculture (CEA) in the U.S. and Canada. Its solutions are also used to grow marijuana, giving you exposure to cannabis and vertical farming.
Hydrofarm is among the few vertical farming stocks that are profitable. In 2021, it reported a net income of US$13.4 million. The company started trading on Nasdaq in December 2020 and has dipped 72% since then as all cannabis stocks took a plunge due to issues around the legalization of marijuana. But the stock has significant growth potential if marijuana becomes legal or when vertical farming picks up.
2. AppHarvest (NASDAQ: APPH)
- Ticker: APPH
- Dividend Yield: N/A
- Market Cap: $73.72 Million
AppHarvest, a US$73.72 million market cap company, has an indoor farm in Kentucky. It grows fruits and vegetables at the farm and supplies them to the top 25 national grocery store chains and restaurants. With one farm it generated net sales of US$9.1 million in 2021. It expects to double its sales in 2022 by diversifying its portfolio to include salad greens and berries. It is also developing three more farms expected to be operational by year-end. In the long term, it expects to scale to 12 farms, depending on how sustainable cash the existing farms generate.
Founded in 2017, AppHarvest is not yet profitable. Its losses would likely increase in the short term as it invests in expansion. The stock has halved since listing on the exchange in June 2020. But it has significant growth potential once the business grows to a sizeable volume. Its upcoming four-farm capacity makes AppHarvest stock a buy for 2022. This is a good time to buy the dip before investors’ price in the growth.
3. CubicFarm Systems (TSE: CUB)
- Ticker: CUB
- Dividend Yield: N/A
- Market Cap: $3.94 Million
Founded in 2015, CubicFarm Systems is a Canadian agri-tech company with a $3.94 million market cap. CubicFarm Systems helps automate machines that indoor farms use for fresh produce, nutritious livestock feed and plant propagation. It also provides consulting services and is building a full-stack CEA platform to help enterprises plan and control their production. It has all the features of a software stock.
CubicFarm has $27.4 million worth of modules pending installation and has signed a $20 million FreshHub customer contract. Moreover, the firm is increasing the dealer count to boost sales. It is a micro-cap company in the early growth stage and reported a net loss of $29.36 million in 2021. The firm is extremely speculative, and should be the last on the list that you consider.
Vertical Farming Stocks: Final Takeaway
Vertical farming stocks took a plunge in 2021/2022 as most of them have ties with cannabis. But 2023 could be a hyper-growth year for vertical farming as rising oil prices contribute to food price inflation. This could encourage companies to produce food nearby and get a permanent and sustainable solution to food inflation.
Disclosure: The author holds no position mentioned in this article. Freedom Stocks has a disclosure policy.
