Greenlane Holdings Inc (NASDAQ: GNLN) shares have started surging after a minor correction from the IPO price. Amidst the bounce back, the current share price still does not reflect the Company’s long-term growth prospects.
GNLN Catalysts And Price Analysis
For starters, the leading distributor of premium vaporization products is fresh from reporting impressive financial results for the first quarter of 2019. Revenue growth as well as expanding product pipeline are some of the milestones that affirm the solid underlying fundamentals.
The company has also positioned itself to capitalize on the ever-emerging opportunities in the growing cannabis, nicotine and hemp derived CBD. The milestone achieved so far justify why the stock deserves a higher valuation especially after 20% plus correction.
After plunging to the $13 a share handle, Greenlane Holdings has bounced back waiting to see if the upward momentum has what it takes to catapult the stock to the IPO price level. Standing in the way of Greenlane completing a bounce back to this year highs is the $17 a share resistance level.
A rally followed by a close above the $17 mark should reaffirm the emerging uptrend, setting the stage for the stock to make a run for the $20 mark. Conversely, failure to take out the $17 resistance level would leave the stock vulnerable to further drops or trade sideways given the underlying bearish trend.
What does Greenlane Holdings Do?
Greenlane Holdings bills itself as a leading distributor of premium vaporization products and consumption accessories in the U.S. Its product pipeline is made up of vaporizers parts, cleaning products as well as grinders and site container.
Sales Growth Boost
Greenlane Holdings has had to contend with wild swings in the market after going public in April on the issuance of 5.25 million primary shares priced at $17 a share. The Company raised net proceed of approximately $80.4 million from the offering.
A plunge below the IPO price has since attracted some buying pressure as the stock has bounced back on investors taking note of underlying developments that affirm the company’s prospects.
An impressive Q1 financial report affirms the Company’s strong start to the year depicted by a 15.3% revenue growth that came in at $49.9 million. The Company’s top-selling products continued to generate strong sales momentum. In addition, the company continues to enjoy a robust response to the introduction of a new line of hemp-derived CBD products.
Greenlane Holding reported revenues of $179 million in 2018 more than double revenue generated in 2017.
Buoyed by sales growth in Q1 Greenlane Holdings is planning to expand its hemp-derived CBD offerings to sustain the on-trend and growth trajectory.
“We are the industry’s leading partner to bring premium vaporization and consumption accessories to market across channels and geographies. We believe we are uniquely positioned with the experience, the people, the infrastructure and the capital to support and drive continued industry growth,” stated CEO Aaron LoCascio.
Q1 gross profit totaled $9 million compared to $9.1 million generated a year early as gross margins shrunk to 18% from 20%. A decline in gross margin reflects changes in sales mix as well as promotions with a key product supplier.
Greenlane Holdings plunged to a Q1 net loss that came in at $17.7 million impacted by a $12.1 million expenses associated with a fair value of convertible notes. Adjusted EBITDA, on the other hand, was a loss of -$0.8 million compared to a gain of $2.7 million reported a year earlier.
A diversified business portfolio is what makes Greenlane Holdings stand out as a cannabis play. The company is currently competing for market share in the cannabis market as well as liquid nicotine hemp-derived products market. Vaping is another sector that the company has ventured into as part of an effort of diversifying revenue streams.
Revenue growth, as well as solid gross profit margins, are some of the milestones that continue to strengthen the market sentiments. The minor correction from the IPO price of $17 might as well have presented an opportunity to buy the stock at a discount given the Company’s tremendous potential.
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Disclosure: We have no position in GNLN and have not been compensated for this article.