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Kroger Deal Ignited Charlotte’s Web Holdings Last Week


Aug. 5 2019, Published 7:55 a.m. ET

Charlotte’s Web Holdings’ Kroger deal ignited the stock last week. The stock saw an upwards price action of almost 42%. So far, the stock has risen 86% this year.

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Charlotte’s Web Holdings’ Kroger deal

Charlotte’s Web Holdings (CWEB) (CWBHF) announced a distribution deal with Kroger (KR) last week. According to Charlotte’s Web Holdings, Kroger “has begun carrying Charlotte’s Web products in multiple states with a plan to roll out to a total of 1,350 store locations in 22 states.” After Charlotte’s Web Holdings’ Kroger deal, its products are available at more than 8,000 retail locations across 22 states in the US. Overall, five mass retailers sell Charlotte’s Web Holdings’ products now.

Retail locations

With the Kroger deal, Charlotte’s Web Holdings added more than 4,650 retail locations this year. The company’s retail presence has more than doubled. Earlier, the company said that it’s in talks with Amazon as well. A presence on Amazon could provide a major breakthrough for Charlotte’s Web Holdings. The company has been steadily expanding its footprint. In June, Charlotte’s Web Holdings announced its new product line—CBD gummies. In May, Charlotte’s Web Holdings also expanded its product line for canines.

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Markets reacted positively to the Kroger deal

Markets reacted positively to Charlotte’s Web Holdings’ Kroger deal. The stock gained 42% last week, which took its year-to-date gains to 86%. While last week’s price action might look a bit aggressive, we need to read it in conjunction with Charlotte’s Web Holdings’ valuation. Charlotte’s Web Holdings saw a selling spree in May. Back then, we noted that the company’s valuation multiples look reasonable given its growth prospects.

Analysts’ estimates

Two analysts gave Charlotte’s Web Holdings a “strong buy” rating,” while five analysts polled by Thomson Reuters gave it a “buy” or equivalent rating. Charlotte’s Web Holdings received a mean consensus target price of 32.27 Canadian dollars, which represents a potential upside of 14.4%.

Charlotte’s Web Holdings’ second-quarter earnings are scheduled to be released on August 14. The company will likely post revenues of $26.2 million in the second quarter. In comparison, the company posted revenues of $21.7 million in the sequential quarter. Charlotte’s Web Holdings will likely post an adjusted EBITDA of $7.3 million in the second quarter. The company posted an adjusted EBITDA of $4.5 million in the first quarter. The company’s first-quarter EBITDA fell short of analysts’ estimates.


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