We recently published a list of 7 Worst Vertical Farming and Hydroponic Stocks to Buy. In this article, we are going to take a look at where iPower Inc. (NASDAQ:IPW) stands against other worst vertical farming and hydroponic stocks to buy.
Vertical farming and hydroponics have proven to be revolutionary solutions in the agriculture sector, addressing food security, sustainability, and urbanization challenges. The global hydroponics market is expected to grow to $25.1 billion by 2027 from $12.1 billion in 2022, as per MarketsandMarkets. On the other hand, the vertical farming industry is forecasted to grow to $50.1 billion by 2032 from $6.92 billion in 2024, according to Fortune Business Insights. Hence, the sector has strong growth potential.
However, despite such positive forecasts, not all companies in the sector are poised for success. Several players are facing a downfall due to rising operational costs, scalability-related issues, and financial instability. These factors make some of the stocks in the sector riskier than others. One of the main factors affecting the industry is the high cost of setting up and maintaining vertical farms. High capital investment is required to support innovations like LED lighting, AI-driven automation, and climate-controlled systems. Although innovations like the CoolGrow VF LED light have enhanced energy efficiency by up to 38%, overall operational costs remain high. Moreover, farm input costs have climbed 44% since 2019, according to AHDB, with fertilizer, electricity, and machinery costs surging between 38% and 50%, decreasing profit margins. Such rising costs put pressure on companies to maintain profitability, especially where the industry struggles with tight margins.
Similarly, dependence on artificial lighting and climate control results in high energy consumption, increasing costs, and reducing profitability. Although technological advancements are being made to decrease costs, energy-intensive operations hit profit margins. Additionally, supply chain disruptions, especially after the COVID-19 pandemic, have added further complications. Labor-related shortages and transportation issues have put pressure on companies, making it difficult to scale operations efficiently. Many vertical farms rely on highly specialized components, and delays in sourcing critical equipment halt expansion efforts.
Furthermore, the hydroponics sector has also been facing regulatory uncertainty. Although cannabis legalization in several markets initially increased demand for hydroponic systems, inconsistent regulations and oversupply in the cannabis market have stunted growth. Many companies in the sector that heavily rely on cannabis cultivation have faced difficulties in pivoting to other revenue streams. On the other hand, although demand for vertical farming produce is increasing, it faces challenges due to higher price points compared to traditional agriculture. While sustainability is an attractive selling point, budget-sensitive consumers tend to go for cheaper options, resulting in a decrease in the market reach of vertically farmed produce.
