How Investors Are Reacting To Scotts Miracle-Gro (SMG) Considering Exit From Cannabis Subsidiary

• Scotts Miracle-Gro recently announced it is exploring an exit from the cannabis market and considering a sale of its Hawthorne Gardening subsidiary, following ongoing industry challenges and declining sales.
• This move reflects an adjustment in response to tightened federal regulations, significant overproduction, and nearly US$2 billion invested in the cannabis venture, while leaving the possibility for future re-entry if the regulatory landscape changes.
• We'll explore how Scotts Miracle-Gro's potential divestiture of Hawthorne Gardening could influence the company's broader investment outlook and strategic priorities.

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Scotts Miracle-Gro Investment Narrative Recap

To be a shareholder in Scotts Miracle-Gro, you generally need to believe in the potential for long-term growth in consumer lawn and garden products, supported by ongoing innovation and efficiency efforts. The recent exploration of a Hawthorne Gardening sale signals a shift back to core strengths and could help reduce earnings volatility; this development may moderately strengthen the most important short-term catalyst, which is the company's focus on core consumer business expansion. The biggest risk remains shifting consumer preferences toward sustainable products, but exiting Hawthorne has no immediate, material impact on this area.

Among recent announcements, the company's reaffirmation of its guidance for low single-digit growth in U.S. Consumer net sales this year is most relevant. This outlook reinforces the importance of the core consumer business as the main source of stability, especially as Scotts Miracle-Gro steps away from the more unpredictable cannabis sector and reallocates resources to its traditional product lines.

However, investors should also consider that, despite a renewed focus on the core business, changing consumer expectations about sustainability and environmental responsibility remain a significant risk that could...

Read the full narrative on Scotts Miracle-Gro (it's free!)

Scotts Miracle-Gro's outlook anticipates $3.5 billion in revenue and $348.1 million in earnings by 2028. This is based on a projected annual revenue decline of 0.8% and a $295 million increase in earnings from the current level of $53.1 million.

Uncover how Scotts Miracle-Gro's forecasts yield a $76.00 fair value, a 20% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members produced four fair value estimates for Scotts Miracle-Gro, ranging from US$48.25 to US$87.71 per share. While these figures span both bullish and cautious viewpoints, remember that potential margin pressures from shifting to environmentally friendly products continues to influence company prospects in different ways for each investor.

Explore 4 other fair value estimates on Scotts Miracle-Gro - why the stock might be worth 24% less than the current price!

Build Your Own Scotts Miracle-Gro Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Scotts Miracle-Gro research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.
• Our free Scotts Miracle-Gro research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Scotts Miracle-Gro's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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