Charlotte’s Web: November Price Target Update

Charlotte’s Web Holdings (CWBHF) (CWEB) is down by 15.44% on the TSE (Toronto Stock Exchange). This calculation is based on its November 5 closing price of 15.12 Canadian dollars. Since the company reported its second-quarter earnings on August 14, the stock has lost almost 43.58% on the TSE.

In the second quarter, the company reported revenues of $25.02 million, which was shy of the consensus estimates by $2.78 million. The company also reported a non-GAAP EPS of $0.02, lower than the consensus by $0.03.

The company plans to release its third-quarter earnings results on November 13. Let’s see how analysts’ recommendations and target prices have evolved for the company so far this year.

Analyst coverage for Charlotte’s Web Holdings has increased significantly in the last 12 months. The number of analysts increased from three in December 2018 to eight in November 2019. The price target first dropped from 28.19 Canadian dollars in December 2018 to 27.52 Canadian dollars in February. Thereafter, it continued to rise and reached 32.27 Canadian dollars in May 2019. Analysts maintained this consensus target price until August 2019.

However, the consensus target price dropped to 32.33 Canadian dollars in September 2019 and finally to 31.95 Canadian dollars in November 2019. The downtrend reflects the increasing uncertainty in the global markets as well as rising problems in the cannabis sector.

Analysts gave the company a consensus “buy” rating. Two analysts rated the company as a “strong buy,” and six gave it a “buy” rating. The company received similar ratings in October 2019.

According to an August 12, report by TheFly, Piper Jaffray analyst Michael Lavery initiated coverage for Charlotte’s Web Holdings with an “overweight” rating and a target price of $25 in the US. Lavery estimated the size of the US cannabidiol market to reach $8 billion–$15 billion in the next five years.

Lavery expects Charlotte’s Web Holdings, the largest US CBD player by revenue, to benefit significantly from the expansion of its distribution capabilities. The analyst also expects increasing clarity about the regulatory framework for the US CBD industry to prove to be a growth driver for the company.

In September 2019, Lavery reiterated the importance of regulatory clarity as a positive catalyst for Charlotte’s Web Holdings. The analyst also highlighted up-listing on the Nasdaq or NYSE exchanges as a positive driver for this company.

In April 2019, Benchmark initiated coverage for the stock with a “buy” rating and a target price of $25. In October 2019, PI Financial reduced Charlotte’s Holdings’ target price from 30 Canadian dollars to 28 Canadian dollars. However, PI Financial analyst Jason Zandberg maintained the “buy” rating on the stock. The analyst highlighted factors such as a leading position in the US CBD space, a robust cash balance, and a positive cash flow in the second quarter as key positives for the company.