Charlotte’s Web Holdings Inc: Latest Dip Makes This Pot Stock an Even Better Bargain

Charlotte’s Web Holdings Inc Latest Dip Makes Pot Stock More Interesting
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Charlotte’s Web Holdings Still One of The Top Pot Stocks

It has been a year since recreational cannabis was legalized in Canada, but 2019 hasn’t exactly turned out to be the year of explosive growth for cannabis stocks.

Pot stocks were bullish in the lead-up to legalization and soared higher in the early part of 2019. Exuberance abounded—and then faded.

Despite the downward spiral that virtually every cannabis stock has taken this year, a small number of them remain serious contenders for significant long-term growth. Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF, TSE:CWEB) remains one of the best.

Many analysts have been saying that the cannabis bubble has burst. It hasn’t; it has just been leaking.

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And frankly, for good reason. Cannabis stocks, for the most part, were overvalued heading into 2019. Supply problems, underwhelming operating results, financial losses, share dilution, and vaping deaths haven’t helped either.

These issues have even dragged down excellent cannabis stocks like Charlotte’s Web Holdings Inc.

Currently trading at $13.16, Charlotte’s Web Holdings stock is up about 17% year-to-date. Even though the broader cannabis industry has yet to rebound or find a bottom, Charlotte’s Web has great potential. It has a 12-month price forecast of $30.00, which represents 128% upside from the current level.

CWBHF Stock Overview

Charlotte’s Web Holdings Inc is the largest retailer of cannabidiol (CBD) products in the United States. Some of the seed-to-sale company’s products include CBD oil, topicals, capsules, tinctures, gummies, and products for pets.

The Boulder, Colorado-based company has the largest CBD retail presence in the country. Its products can be found in more than 8,000 retail locations. (Source: “Overview,” Charlotte’s Web Holdings, Inc., last accessed October 10, 2019.)

In July, Kroger Co (NYSE:KR) began carrying the company’s products in 1,350 stores in 22 states. (Source: “Charlotte’s Web Hemp CBD Topical Products Expanding to 1,350 Kroger Stores Across 22 States,” Cision PR Newswire, July 29, 2019.)

In September, Vitamin Shoppe Inc (NYSE:VSI) began carrying Charlotte’s Web products in 738 stores in 45 states. (Source: “Charlotte’s Web Announces 738 Vitamin Shoppe Locations Across 45 States Commence Selling New Gummy Line,” Cision, September 24,)

Its products are so popular, the company increased its 2019 hemp harvest to 862 acres. That’s a massive 187% increase from the 300 acres it planted in 2018. The hemp from the 2018 harvest totaled 675,000 pounds.

For investors who don’t like the idea of buying so-called sin stocks, Charlotte’s Web Holdings stock is an excellent alternative. The company produces and sells CBD products, not medicinal marijuana or recreational pot.

Furthermore, the company buys local; 100% of its hemp is grown in the U.S. by American farmers.

CWBHF Stock Information

Market Cap $1.3 Billion
52-Week High $25.25
52-Week Low $8.13
Shares Outstanding 49.3 Million
Float 45.2 Million
50-Day Moving Average $16.02
200-Day Moving Average $16.89

(Source: “Charlotte’s Web Holdings, Inc. (CWBHF),” Yahoo! Finance, last accessed October 10, 2019.)

Another Strong, Profitable Quarter

In August, Charlotte’s Web Holdings Inc announced that its revenue for the second quarter ended June 30 increased 45% year-over-year to $25.0 million. The company reported another profitable quarter, with net income of $2.2 million, or $0.02 per share. (Source: “Charlotte’s Web Holdings Reports 2019 Q Earnings,” Charlotte’s Web Holdings, Inc., August 14, 2019.)

Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $3.9 million, or 16% of consolidated revenue. This compares to 2018 second-quarter adjusted EBITDA of $6.1 million, or 35% of consolidated revenue.

Adjusted EBITDA slipped in the second quarter of 2019 because the company had been investing in new hires and infrastructure to support projected revenue growth.

During the first six months of 2019, Charlotte’s Web burned through $15.2 million of cash, versus $6.1 million during the same period last year. The increased cash was used to invest in inventory to supply the increasing demand from consumers and retailers. Some of that cash was also used to increase its 2019 hemp crop.

The company ended the second quarter with cash of $51.4 million, compared to $73.5 million at the end of 2018. Working capital expanded to $97.0 million, up from $93.8 million at the end of 2018.

Looking ahead, the company reiterated its previously announced 2019 revenue guidance of between $120.0 and $170.0 million. At the midpoint, that represents a year-over-year growth of 108%.

Analyst Take

We’ve been following Charlotte’s Web Holdings Inc for a while now. And for good reason; it’s one of the best cannabis plays out there.

Charlotte’s Web reports strong revenue growth, is actually profitable, launches new products, and continues to expand its retail presence across the United States.

With CBD sales projected to climb 107% annually for the next five years in the U.S., Charlotte’s Web Holdings Inc, with its first-mover advantage, is set to take advantage of this multi-billion-dollar opportunity.