Investing

AppHarvest, Inc. (APPH): Vertical Farming Is Fruitful Ground For Growth

Green start-up AppHarvest (APPH) is looking to innovate the farming industry with cutting-edge technologies in their high-tech greenhouse farms. After recent set-backs the stock is trading at affordable heights for high-risk investors.

The veggies at AppHarvest (APPH) are growing fast and employment has been going up since the opening of the first high-tech plant in Morehead, Kentucky. AppHarvest, which started trading on Nasdaq on February 1, has lost 75 percent from their February highs and is now trading 20 percent below their IPO-price. The company generated $2.3 million in net sales in the first quarter 2021 as it began harvesting from its Appalachian high-tech indoor farm, representing 3.8 million pounds sold with the farm only partially planted as the facility ramped up.

Big Plans For The Future

AppHarvest is currently operating one high-tech indoor farm that is expected to produce more than 40 million pounds of tomatoes annually, with plans to build a network of 12 high-tech farms by the end of 2025. Two more high-tech farms are now under construction in Kentucky, one designed to grow leafy greens, and another in Richmond planned for tomatoes. After multiple financing rounds this summer four more projects were scheduled for development, and two of those began construction in Q2 2021.

AppHarvest purchased its flagship Morehead farm in March, giving it the ability to leverage the asset at attractive financing rates to fund more development. The company has finalized key terms for a 60% loan-to-value financing transaction for the Morehead facility at an expected interest rate of around 4 to 5%, which is a good deal considering current market circumstances. This summer AppHarvest has done multiple financing rounds to fund other large-scale projects that are still in the pipeline.

Major Stock Correction After High Losses And Lower Guidance

The company reiterated its full-year 2021 outlook of net sales of $20 to $25 million back in Q1, but suffered tremendous losses when the company reported a $32 million net loss in second quarter and had to lower its full year sales guidance to the range of $7 million to $9 million. However, considering the successful funding rounds this summer, AppHarvest (APPH) can continue its aggressive thirst for expansion and continue innovating the farm industry with cutting-edge technologies. However, despite inflation in many assets, tomatoes are trading at 10-year lows, and due to problems in the scaling-up process Q2 was a failed quarter for the sustainable company.

Pessimistic Guidance Could Result In Unexpected Gains

In their latest quarterly report the company addressed viability concerns by coming with a more pessimistic guidance. Despite being on track to have 12 large-scale farms operating in 2025, they have lowered their assumptions due to higher distribution costs as expected. This has resulted in lower expected growth figures as AppHarvest has only incorporated 9 out of 12 farms in their long term guidance, moderating investor expectations for the company. However, the current market cap does not represent the tremendous growth potential for this company correctly. After large losses in the latest quarter investors should reconsidering buying AppHarvest (APPH) stock as sustainable vertical farming is the future.

Disclaimer: The writer of this article holds AppHarvest (APPH) stock, this article should not be interpreted as investment advice or anything like that.

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