With the world population expected to increase to 9 billion by 2050, food production would have to increase 70% to feed the world. This proves challenging as the concerns for global warming and drastic weather conditions worsen. However, with great challenges come the most innovative solutions. Vertical farming is becoming more popular and with it comes more attractive farming stocks.
This method involves stacking of layers of crops which help reduce the water usage up to 80% to 90% compared to other farming methods. These methods usually include techniques such as aquaponics, hydroponics, and aeroponics.
Vertical farming is expected to grow at a compound annual growth rate (CAGR) of 25.2% through fiscal year 2027. The market size is also expected to hit $31.6 billion by the end of the decade.
The seven farming stocks to keep an eye out for in the vertical farming segment are:
- Kalera (OTCMKTS:KSLLF)
- Appharvest (NASDAQ:APPH)
- Hydrofarm Holdings (NASDAQ:HYFM)
- Spring Valley Acquisition (NASDAQ:SV)
- Village Farms International (NASDAQ:NFF)
- GP Solutions (OTCMKTS:GWPD)
- Cubicfarm Systems (OTCMKTS:CUBXF)
Kalera (KSLLF)
Kalera, a Norwegian vertical farming company, mainly focuses on growing pesticide free, non-GMO produce. KSLLF is currently trade over the counter, however in December 2020, they involved Bank of America´s (NYSE:BAC) Bofa Securities for a potential listing on main exchange through a special purpose acquisition company (SPAC).
Not only has Kalera opened its first facility in Orlando in 2020, but they have planned to open another 6 facilities in the U.S. and have already acquired more than 50 customers such as Sysco (NYSE:SYY), US Foods (NYSE:USFD), Freshpoint and Marriot (NASDAQ:MAR).
Kalera reported $887,000 in revenue for 2020 and is expected to increase its production capacity by 12 times after the new facilities are operational in 2022. In February, they also acquired Vindara in order ¨optimize seed breeding¨ which claims to ¨increase both crop yield and the speed of growth cycles in its current and future facilities.¨
Appharvest (APPH)
APPH stock has been listed through a SPAC business combination and traded as high as $42.90 in February, however, it has since been traded lower at $15.18 in recent days. Appharvest is among the largest indoor farms in the U.S. with its 60-acre facility and has a development pipeline expected to reach 525 acres by 2050. This company has also secured partnerships with grocers, such as Costco (NASDAQ:COST), Target (NYSE:TGT), Kroger (NYSE:KR) and Walmart (NYSE:WMT).
The company expects revenue of $21 million for 2021 and its net revenue is expected to increase to $387 million by 2025. In April, Appharvest acquired Root AI which is an agricultural robotics and artificial intelligence company that will increase efficiency and sustainability.
Hydrofarm Holdings (HYFM)
HYFM is currently traded at $62 after a 52-week high of $95.48 which for investors is an alluring entry point into farming stock. Hydrofarm is in manufacturing and distributing of controlled environment agriculture (CEA) equipment which is directly related to growth in vertical farming.
In fiscal 2020, Hydrofarm reported revenue of $342.2 million which was higher by almost 46% year-over-year (YOY). For 2021, they are expecting 20% to 25% more organic sales growth after launching 6 new products back in March for sustainable indoor farming.
According to Hydrofarm, the total addressable market (TAM) for its products is roughly $8 billion and also worth mentioning is that they will strongly benefit from the growing cannabis industries popularity.
Spring Valley Acquisition (SV)
In March 2021, Aerofarms announced that it would go public through a business combination with Spring Valley Acquisition. This SPAC merger is expect to close in Q2 2021 at a pro forma equity valuation of $1.2 billion.
Aerofarms is one of the world leaders in vertical farming as they have grown around 550 varieties of fruits and vegetables and have set themselves apart with their investments in technology. So far they have 13 issued patents, 38 pending patent applications and 46 designated trade secrets. This technology is reflected in the company´s superior crop yield, low water usage, and fast crop turnover. From a revenue perspective, aerofarm expects $13 million for fiscal 2022 with an expected increase to $553 million by fiscal 2026.
Village Farms International (VFF)
Village Farms has 30 years of experience in ¨developing and operating mega-scale greenhouses.¨ This company has an estimated 500 acres of greenhouse operation and recorded $157 million in sale for 2020 all while using 86% less water and 97% less land compared to outdoor farms.
VFF owns Pure Sunfarms, which is a Canadian greenhouse/indoor cannabis producer. Their current products include dried cannabis flower, gummies, vapes and oils. With the U.S. leaning towards the full federal legalization, there is no doubt why the name has surged in popularity in the last year.
Hoping to maintain their positive momentum, VFF reported total sales of $170.1 million which is roughly an 18% increase YOY.
GP Solutions (GWPD)
GWPD is one of the riskier stocks on this list with a market cap of $70 million. GP Solutions is a provider of ¨growing systems for specialty leaf crops and herbs¨ using soilless groth practices and hydroponic based pods.
In October 2020, GP entered an agreement with Advanced Container Technologies to sell and distribute GP´s products in the U.S. and its territories to increase its product visibility. They also entered into research and development for growing strawberries which has a market size of $18.37 billion.
Cubicfarm Systems (CUBXF)
Cubicfarm Systems is a manufacturer and seller of modular growing systems with patented and patent-pending technologies. In 2019 they acquired Hydrogreen ,which is ¨a manufacturer of fully automated hydroponic growing systems that produce live, green animal feed.¨ They also own Cubicfarm Produce,a subsidiary that produces lettuce and microgreens making it a well diversified company.
