Analysts Just Shaved Their Greenlane Holdings, Inc. (NASDAQ:GNLN) Forecasts Dramatically

Today is shaping up negative for Greenlane Holdings, Inc. (NASDAQ:GNLN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 13% to US$3.68 in the past 7 days. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.

Following the latest downgrade, the current consensus, from the five analysts covering Greenlane Holdings, is for revenues of US$168m in 2022, which would reflect a chunky 8.8% reduction in Greenlane Holdings' sales over the past 12 months. Losses are supposed to balloon 22% to US$8.38 per share. However, before this estimates update, the consensus had been expecting revenues of US$208m and US$4.80 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for Greenlane Holdings

The consensus price target fell 16% to US$37.80, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Greenlane Holdings analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$4.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it's the idea that Greenlane Holdings' decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 17% to the end of 2022. This tops off a historical decline of 4.7% a year over the past three years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.1% annually. So while a broad number of companies are forecast to grow, unfortunately Greenlane Holdings is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Greenlane Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Greenlane Holdings' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Greenlane Holdings.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Greenlane Holdings' financials, such as major dilution from new stock issuance in the past year. Learn more, and discover the 2 other concerns we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.