Within the mix of companies associated with the cannabis industry, Greenlane Holdings (GNLN) spent much of this year among the least appealing stocks. From the beginning of 2020 through mid-October, our proprietary POWR Ratings service gave it either D or F grades; it only began to fluctuate between a C and a D from mid-October to late-November.

GNLN muscled its way into a B rating at the end of November and moved into December as a “Buy,” even snagging an A grade for “Strong Buy” over a couple of days. This dramatic comeback might have occurred too far below the proverbial radar to warrant wider attention, which makes GNLN among the most intriguing cannabis stocks to watch into 2021.

Headquartered in Boca Raton, Florida, GNLN distributes cannabis accessories and lifestyle products in global markets, with a customer base of more than 7,000 retail outlets and several B2C e-commerce sites aimed at the North American and European markets. The company owns a well-regarded product portfolio that features the Higher Standards retail chain – its flagship store is in Manhattan’s trendy Chelsea Market – and a range of brands including Vibes rolling papers, Green Lotus CBD tinctures and gummies and the Marley line of pipes, cases and bubblers. Furthermore, the company is partnered with several leading cannabis industry brands including the Canopy Growth Corp. (CGC)-owned Storz & Bickel and PAX Labs. 

So why has 2020 been such a desultory odyssey for GNLN until the last several weeks of the year? Let’s break it down by our POWR Ratings.

Trade Grade: A

GNLN is trading at $4.56, slightly below its 52-week high of $4.98 and comfortably above its 52-week low of $1.02.

The uptick in its stock vibrancy can be traced to the Q3 earnings report from Nov. 16, when GNLN announced quarterly revenue of $35.8 million, up 10% from the $32.4 million in Q2 2020 but down 20% from $44.9 million for Q3 2019. The Q3 gross profit was $2.5 million, or 6.9% of net sales, down from $6.4 million, or 14.3% of net sales in Q3 2019. Q3 2020 net loss was $13.8 million, compared to $9 million in the same period one year earlier, and the adjusted EBITDA loss was $6.3 million, versus an adjusted EBITDA loss of $3.4 million in Q3 2019.

Still, many people saw the Q3 numbers as a positive sign. As CEO Aaron LoCascio explained in the Q3 earnings call, sales of the company’s Greenlane brands grew 65% to approximately 5.6 million in Q3 2020 or 15.5% of total revenue, while GNLN arranged to expand the availability of its Marley Naturals’ accessories to specialty locations across Europe, the Caribbean and Latin America. 

“This is an important component of our global expansion strategy as Marley Naturals is one of our most popular brands, growing 210% compared to Q3 2019, and we are extremely pleased to bring these products to customers in new markets,” LoCascio stated, adding that GNLN’s online sales “grew 196% for Q3 2020 compared to Q3 2019. And we anticipate that many customers that were driven online due to the ongoing pandemic will remain online shoppers when the pandemic ends.”

Buy and Hold Grade: B

Lest we forget, the company’s initial public offering on April 18, 2019, saw its stock open for trading at $29 per share. The euphoria of that moment vanished too quickly and this year has been mostly painful for the stock. Much of this problem was the continuing after-effects of GNLN distancing itself from the vaping product company Juul, which ran afoul of the U.S. Food and Drug Administration last year on the marketing of its products. GNLN blamed its dismal Q2 net sales of $32.4 million – a 38.9% year-over-year plummet – as being “largely attributable to the FDA’s restriction on the sale of certain products, primarily mint-flavored JUUL, and the execution of Greenlane’s business transformation initiative, whereby the company has deliberately moved away from low-margin JUUL sales, to focus on higher-margin products.”

Still, with Juul being in GNLN’s rear-view mirror, the company is eager to push forward. During the fall, it announced becoming the exclusive distributor of the Stündenglass Gravity Hookah, billed as the world’s first gravity-powered contactless water pipe, and a partnership with Eyce, a manufacturer in silicone smoking apparatus, on the ProTeck Glass Series. These are all steps in the right direction, which is reflected in the B grade.

Overall Ranking: B

GNLN is ending 2020 on the right footing. While it might have taken a bit too long to find its groove, the company has earned a belated B grade (for “Buy”).

Bottom Line 

Not unlike many companies, GNLN is eager to kiss 2020 goodbye. But unlike many companies, it is moving into a new year with less baggage and a better business focus within a fast-growing industry. Keep an eye on this stock in the weeks to come.

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GNLN shares were trading at $4.35 per share on Thursday afternoon, down $0.21 (-4.61%). Year-to-date, GNLN has gained 33.64%, versus a 17.09% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...

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