Borislav Tonev

Growlife Inc (OTCBB:PHOT) See-Sawing Up And Down

by Borislav Tonev September 16, 2013
0PHOT.pngIf you take a quick look at the chart on the right, you'll see that Growlife Inc (OTCBB:PHOT, PHOT message board)'s stock performance is not what you'd call "consistent". When we last covered the company, the ticker was ascending steadily and it was challenging the $0.04 per share mark. Unfortunately, it failed to withstand the increased pressure and a few sessions after our article went online, it was back around $0.32.

The behavior displayed over the last couple of days suggests that PHOT wants to get back up badly. It all started last Monday, when six and a half hours of trading resulted in around 5.5% in gains and since then, PHOT has been on something of a winning spree. Friday proved to be particularly successful when the ticker opened the session at $0.04, ran all the way to $0.047 after which it settled down at $0.045. Lots of shares changed hands as well, but the most important question at the moment is: "Is there anything to get excited about?".

Well, according to PHOT's management team, there are quite a lot of things to get your heart racing. On September 9 they issued a press release in which they informed us that their name has been featured in the latest edition of "High Times" (one of the most reputable publications in the cannabis industry, according to the PR). On Wednesday, Mr. Sterling Scott, PHOT's CEO, took the time to write a special letter to the shareholders in which he explains that the new position taken on by the US Department of Justice (DOJ) will help his company achieve enormous success. Interest was accumulating and the daily trading volumes were starting to get bigger and bigger.

On Thursday, just a day after Mr. Scott talked about the great opportunities presented by the new policy on medical pot, another press release hit the informational portals. Apparently, the politicians' more relaxed attitude towards marijuana is already having an effect. The PR said that ever since the DOJ announced that they won't be challenging the state marijuana laws, one of PHOT's websites has broken the previous revenue records. DOJ's announcement came out on August 29 which means that the records that the PR talked about were apparently smashed in just two weeks. We're not sure if this gives shareholders and potential investors such a crystal clear idea of what is to come but it does seem like a great way for the management team to say: "We told you so!".

3PHOT_logo.pngNevertheless, the general public reacted. The press release came out in the afternoon which means that the effects on Thursday's session were minimal. On Friday, however, trading was intense. More than 22 million shares changed hands and the price climbed by about 20% in just six and a half hours. PHOT's claims about the record-breaking revenues are yet to be put to the test, but we can say for sure that they triggered one of the most active trading sessions in a while and there are some things that might make today quite an exciting day as well.

PHOT woke up early to inform us that they'll open a new retail store. It will be located in Santa Rosa, California, it will be the seventh of its kind and the ribbon will be cut sometime in October. The effects of the PR are visible right now, just an hour into the session. So far, the number of traded shares has exceeded 10 million and the ticker is currently around 4% above Friday's close. Does that mean that the performance in the days to come will be just as impressive?

Well, if the historical performance is anything to go by, no. In a matter of a little over a month, PHOT jumped twice above the $0.40 per share mark fueled by optimistic news coming out of the company HQ. As you can see from the chart at the beginning of the article, however, both rallies were followed by huge drops during which a lot of investors suffered some heavy losses.

0WTER.pngAnother thing that leads us to believe that the current ascend won't last long is the fact that the effects of the recent developments won't be confirmed at least until the next financial statements, which means that, at the moment, at least, the PR action looks like an unnecessary attempt to raise some awareness around the stock. We all know that, more often than not, small cap ventures suffer badly from these sort of practices and what better to prove our point than the chart for Alkaline Water Company Inc (OTCBB:WTER) - a ticker that is being smashed by the consequences of a multi-million dollar promotion.

Of course, PHOT is not in the pumpers' sights (at least for the time being) and some of you might argue that plunges similar to the one displayed by WTER are impossible, but still, we reckon that weighing the risks carefully is absolutely essential before making any investment decisions.

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