Agrify Corp (NASDAQ: AGFY) stock shifted into rally mode last week, soaring over 63% from its intra-week low of $0.46 to $0.75 before giving back some to profit-taking and closing the trading week at $0.60. Even with profit-taking, the increase at the close represented an impressive tally. But here's the better news for those investors who missed the initial move- it could be the precursor to higher highs, especially on the heels of news indicating AGFY is growing revenues faster than many expected. Better still, those revenues result from a company shifting from hyper-growth speed to warp.
That's not an exaggeration. And considering volume was 10X its normal pace, with over 22 million shares exchanging hands last Thursday, investors apparently do more than agree, they want onboard. That's understandable. Despite the jump in value, AGFY trading under a dollar still exposes a significant disconnect between AGFY assets, inherent potential, and its share price. That gap is based just on the knowns. It's also important to include forward-looking projections when appraising Agrify, accounting for its intentions to grow into a much larger company in 2024.
That optimism is warranted, justified by tangibles, including that despite its microcap size, Agrify is a respected and leading provider of innovative cultivation and extraction solutions for a booming industry. Additionally, AGFY is one of the few companies to combine data, science, and technology to not only support its strengthening market position but to also and enhance it and keep them at the forefront of a sector revolution regarding hydrocarbon extraction technology.
Video Link: https://www.youtube.com/embed/XJR0elaSVCw
Rally Hats In Style For AGFY
The Thursday surge appeared to be in response to the company signing a multi-year cultivation and extraction deal with HarvestWorks Farm, New Jersey, a licensed New Jersey operator. The deal is comprehensive and includes a $3.4 million cultivation and extraction order for 156 of Agrify’s Vertical Farming Units, a complete Turnkey Pure Pressure Solventless extraction Lab Package, a 2-year Service Support and Production Success Fee agreement at $350 per pound, and a five-year SaaS Fee Agreement worth $1 million.
Here's something to consider- this deal can usher in many more like it. That's because HarvestWorks Farm is a well-known company and one of the first operators licensed for plant cultivation and manufacturing in the state. In other words, being chosen by and serving the best excellent on the business resume'. And with New York and other states around the Jersey borders virtually decriminalizing use, competition in the space will be fierce. Similar to most competitive industries, only the strong will survive. And since Agrify fortifies client strengths, this under-a-dollar company is well-positioned to exploit a potentially massive national and regional opportunity.
Also, keep in mind that from a fundamentals perspective, AGFY is doing the work to make sure business earned can and will fall faster to its bottom line. A recent update from the company provided bullish guidance for 2024, told investors to expect significantly better bottom line results, and hinted at gross profit to increase by 105% to $1.9 million in Q4. That's not all. Investors were told to expect AGFY to post the lowest cash burn in its history, which will put them on course to reach cash flow breakeven by the second half of this year. The Q4 report is expected to be released before the end of March. Confirming guidance and providing another round of bullish commentary could help fuel the next leg higher in an already impressive rally.
Of course, abilities matter. After all, they are the value drivers that make small companies larger. Agrify has plenty. And clients appreciate the value provided.
A Products Portfolio Presenting A Win-Win Proposition
Particularly, Agrify's proprietary micro-environment-controlled Vertical Farming Units (VFUs) enable cultivators to produce the highest quality products with unmatched consistency, yield, and ROI. Better yet, clients can do so at scale when using AGFY's comprehensive extraction product line, including hydrocarbon, ethanol, solventless extraction, post-processing, and lab equipment. This empowers producers to maximize the quantity and quality of extract required for premium concentrates. Simply said, Agrify clients can do less work to make more money.
Many are. Last month, Agrify announced the successful installation of a PX-30 Hydrocarbon Extraction System at Lume CC's Michigan facility. That implementation facilitates a win-win proposition. For Agrify, installing the PX-30 Hydrocarbon Extraction System is a milestone in revenue generation and product validation. That validation may be the more valuable long-term consideration, noting the endorsement of the most extensive system in its PX-Extraction series could lead to additional sales. Considering the PX-30 represents cutting-edge design advancement in hydrocarbon extraction technology to enhance efficiency and precision in the extraction process, that's likely. Especially in a sector where brand quality can be an unrivaled competitive advantage.
Remember, for companies to stay competitive in a red-hot industry, quality control, consistency, and scale are vital. There are few second chances in a saturated market and more likely than not no third chances. In other words, the best defense against competitive poachers is having a better offense, in this case, better products. That reason is bringing Agrify onto more client and investor radars. Deservedly so. Remember, validation supports growth. And by proving its abilities to deliver and integrate state-of-the-art solutions to the CBD and hemp industries across the country, Agrify is building on an already solid reputation.
Repeat Orders Are Validation
That's driving repeat business, evidenced by its latest sale to Lume, which has been operating with Agrify's XMU Hydrocarbon Extraction System. As its business grew and the operation required additional speed and throughput, it wasted no time turning to Agrify for solutions that provide immediate and accretive impact. As noted, they purchased the PX-30 system through Agrify's subsidiary, Precision Extraction Solutions, intending to elevate its extraction capabilities and meet the increasing demand for premium extracts in the CBD and hemp markets. Reasons support Lume's decision.
Key features of the PX-30 hydrocarbon extraction system include:
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High Extraction Efficiency: The PX-30 ensures optimal extraction yields, maximizing the production of high-quality extracts of up to 240+ lbs. per 8-hour shift.
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Operational Design: Created with the operator in mind, the PX-30 offers ultra-low temperature operation with fast recovery times, with or without a compressor. All functions and features are easily accessible in a linear process flow with conveniently located controls and ergonomics designed for the operator.
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Safety/Compliance: Agrify prioritizes safety, and the PX-30 is built with state-of-the-art safety features to comply with 3A sanitary and cGMP standards.
Those differences become client advantages. And combining the two to generate sales, the perceived valuation gap between assets, revenues, and share price could close quickly. Driving that intention is that Agrify is leveraging industry-best solutions that keep them well-positioned to capitalize on revenue-generating opportunities from equipment sales needed in today's ancillary extraction market. Other news attracted investor interest.
Also in February, Agrify announced signing a Turnkey Ethanol Extraction and Lab Equipment Package deal with Denver Cole Labs, a conditionally licensed New Jersey operator. It's a substantial purchase. Precision Extraction's Turnkey Ethanol Extraction and Lab Equipment Package comprises a C-15 Centrifuge Ethanol Extractor, Solvent Recovery System, Decarboxylation Package, Short Path Distillation Kit, and Expert On-Site training. Denver Cole has also elected Precision Extraction's C1D1 Extraction Booth to safely manufacture products in their lab. In addition, Agrify's EliteLab distillation control and tracking software will help manage and optimize the day-to-day operation of the G3X-R short path system. Order cost is expected to reach upwards of $500,000 to start. They could grow appreciably higher through add-ons or by Agrify again showing proof of concept to other potential sector clients.
Notably, the deal with Denver Cole Labs does more than expand Agrify's market presence; it also enhances its pedigree as a premium extraction services equipment provider in New Jersey. Moreover, it adds to the growing partnerships in the Northeast and across the country, a solid testimony to operators' trust in Agrify's team and technologies in the most competitive markets. This newest deployment will allow Denver Cole to produce high-quality ethanol extracts at scale, benefitted by repeatability and ensuring consistent products every run. Of interest, Agrify's technical and compliance experts were instrumental in selecting the equipment package under New Jersey regulations to meet the customer's goals. Navigating those compliance issues is an Agrify service that must be fully appreciated, especially as a powerful resource for building additional long-term client relationships across the United States. The news flow in February didn't end with those announcements.
Additional February Deals Contribute To The Bullish Thesis
Last month, Agrify announced signing a term sheet with PDS Ventures, LLC, a licensed Michigan operator, providing them a multi-year end-to-end managed extraction services agreement. This Managed Services agreement adds a new revenue stream, serving as a first-of-its-kind program where Agrify leases turnkey extraction and post-processing lab equipment to qualified operators. The company will also provide a full-time, on-site, hands-on customer success specialist to guide and manage extraction-related operations for the customer. The goal is to leverage the value inherent to these Managed Services to significantly increase the average lifetime value of our customers. But it's also designed to make money. Quickly.
The multi-year Managed Service contract facilitates Agrify to collect monthly production success fees based on the finished product produced, including a monthly management fee during the contract term. Its deal with PDS Ventures could earn Agrify up to $2 million throughout the lifetime of this multi-year managed service contract. That's just one agreement. This services model could explode in popularity, intensifying Agrify's sweet spot of opportunity through 2024. With client endorsements referring to this Managed Services product as a business "game changer," exploiting that potential can be potentially lucrative for the company in coming quarters.
There's much to like about this fast-growing company. And the good news is that AGFY is eager to tell its story, providing investors with plenty of ammunition to make an informed investment decision. Couple expected catalysts with a potentially record-setting financial performance in Q4, the bullish action ahead of updates is understandable. After all, they've talked about value-creating events, including new revenue streams, increasing deal-making momentum, best ever operating performance, and showing it can compete with sector large caps. Thus, while the bullish case for any stock is usually speculative, there is a way to mitigate risk. Find companies that provide evidence-based contributions to formulate the appraisal. Agrify Corp. does that. And because of that, the AGFY share price may do more than follow an optimistic lead; it might precede it.
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