Charlotte’s Web Holdings Inc: Stock Price Up 77% in 2019, Q2 Revenue Growth of 45%

Charlotte’s Web Holdings Inc: Stock Price Up 77% in 2019, Q2 Revenue Growth of 45%
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Charlotte’s Web Holdings Inc Continues to Dominate

Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF, TSE:CWEB) continues to be one of the most compelling cannabis stocks out there. The company’s share price is up approximately 77% year-to-date, significantly outperforming its peers.

In the same period, Aurora Cannabis Inc (NYSE:ACB) increased by 26%, Aphria Inc (NYSE:APHA) went up by 15%, Canopy Growth Corp (NYSE:CGC) grew by 19%, and Cronos Group Inc (NASDAQ:CRON) rose by 28%.

Those numbers are a little deceiving, too. CCWBHF stock is actually increasing, whereas the others have been on a downward trajectory for months.

The reason? Investors love what Charlotte’s Web is doing. The company has been reporting strong revenue growth and ongoing profitability. It has the largest retail presence in the U.S., but it just got even larger: Kroger Co (NYSE:KR) agreed to sell the company’s products in 1,350 stores in 22 states. Charlotte’s Web products are now available in thousands of retail locations across the country. (Source: “Charlotte’s Web Hemp CBD Topical Products Expanding to 1,350 Kroger Stores Across 22 States,” Charlotte’s Web Holdings Inc, July 29, 2019.)

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To meet further demand for its cannabidiol (CBD) products, Charlotte’s Web increased the number of hemp acres it planted in 2019 to 862 acres, a 187% increase from the 300 acres it planted last year.

These are the kinds of things that get investors juiced.

CWBHF Stock Overview

When it comes to market share, no one can compete with Charlotte’s Web Holdings Inc, which is the world’s leading CBD company by market share. The company does not produce or sell marijuana, but rather produces, manufactures, and sells CBD liquid products, topicals, capsules, gummies, and pet products.(Source: “Overview,” Charlotte’s Web Holdings Inc, last accessed August 14, 2019.)

The number of retail stores you can find the company’s products in has been soaring. In 2018, they were available in around 3,700 stores across the country; today they can be found in 8,000.

In addition to its rapidly expanding retail channel and online store, the company has launched a pilot digital marketing program with Google, otherwise known as Alphabet Inc (NASDAQ:GOOG), and it is working to make its products available through Amazon.com, Inc. (NASDAQ:AMZN).

CWBHF Stock Information
Market Cap $863.8 Million
52-Week High $25.25
52-Week Low $8.13
Shares Outstanding 25.4 Million
Float 39.6 Million
50-Day Moving Average $17.31
200-Day Moving Average $16.62

(Source: “Charlotte’s Web Holdings, Inc. (CWBHF),”Yahoo! Finance, last accessed August 14, 2019.)

Q2 Revenue Up 45%, Net Income of $2.2 Million

Before the August 14 opening bell, Charlotte’s Web Holdings Inc announced that second-quarter revenue increased 45% year-over-year to $25.0 million. Net income was $2.2 million ($0.02 per share), compared to $3.7 million ($0.04 per share) in the same prior-year period. (Source: “Charlotte’s Web Holdings Reports 2019 Q Earnings,” Charlotte’s Web Holdings Inc, August 14, 2019.)

Both of these numbers fell short of what Wall Street was looking for though; analysts were calling for second-quarter revenue of $26.3 million and net income of $0.04 per share. Nevertheless, the company’s full-year guidance remains on track.

Charlotte’s Web’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) came in at $3.9 million, or 16% of consolidated revenue.

In the second quarter of 2018, adjusted EBITDA was $6.1 million, or 35% of consolidated revenue. The decrease in the ratio during the second quarter of 2019 is a result of the company’s continued investment in infrastructure and hiring as it works to support expected revenue growth.

During the second quarter, Charlotte’s Web announced distribution deals with a number of national retailers, increased the number of retail locations carrying its products by 32% to 787%, launched a new pet line and new line of CBD gummies, and uplisted to the Toronto Stock Exchange, giving it better visibility.

The company anticipates its revenue to grow faster than its operating expenses in the second half of 2019 and it expects to report continued top-line revenue growth. Its full-year revenue guidance remains in the range of $120.0 and $170.0 million.

Wall Street is looking for revenue from Charlotte’s Web of $137.0 million, up 97% from $69.5 million in 2018. Analysts expect the company’s  revenue to soar to $312.0 million in 2020.

EBITDA is forecast to be $42.0 million in 2019 and $104.0 million in 2020, up from $21.0 million in 2018. Earnings per share are projected to come in at $0.27 in 2019 and $0.68 in 2020, up from $0.12 in 2018.

Analyst Take

CWBHF stock is up 77% and it continues to have great long-term growth potential. The company reported strong second-quarter revenue growth and ongoing profitability.

While both numbers fell short of what Wall Street was looking for, Charlotte’s Web Holdings Inc significantly increased its retail footprint, which should help the company meet its 2019 guidance. That could help the business beat its quarterly and annual projections, especially in light of its growing distribution network, its new products, and the strong demand for its CBD products.