Charlotte’s Web: Top Four Things to Know about the Stock

Charlotte’s Web Holdings (CWEB) (CWBHF) is a vertically integrated cannabis company that manufactures hemp-derived products. The company completed its initial public offering on August 30, 2018, and trades on the Toronto Stock Exchange with the ticker symbol “CWEB.”

On August 14, Charlotte’s Web reported lower-than-expected Q2 earnings. For the second quarter, the company missed analysts’ top- and bottom-line expectations. Its subdued second-quarter performance and the cannabis sector’s weakness appear to have led to a fall in the company’s stock price. On November 1, Charlotte’s Web lost 45% of its stock value since reporting its second-quarter earnings. On the back of this information, let’s look at the company’s top four factors.

Charlotte’s Web partners with Nielsen

Last month, Charlotte’s Web announced that it would partner with Nielsen to guide US retail companies on the growth of the CBD (cannabidiol) space. Since the legalization of hemp in December 2018, the CBD market has been on the rise. In July 2019, Brightfield Group projected the CBD market to hit $23.7 billion by 2023.

Through this partnership, Charlotte’s Web and Nielsen hope to offer US-based retailers information about consumers’ preferred brands, products, and attitudes. Charlotte’s Web expects this information to help US-based CPG manufacturers and retailers to strategize their initiatives to meet the changing needs of the customers.

Expansion of CWEB’s retail presence and cultivation

Food, drug, and mass retailers such as CVS Health and Kroger have started selling CWEB’s products. By the end of the second quarter, the company was selling its products in 7,871 stores. In September, Charlotte’s Web announced that it would sell its products in 738 locations of The Vitamin Shoppe, which are located in 45 states.

To meet the growing demand for its products, CWEB has expanded its cultivation of hemp. The company planted 862 acres of hemp in 2019, which represents 187% growth from 300 acres in 2018. In July 2019, the company extended its partnership with The Center for Discovery in New York, intended to develop a superior variety of hemp.

Introduction of new products

Charlotte’s Web focuses on the introduction of new products to meet the various needs of its customers and to drive its revenue. In the second quarter, the company introduced CBD-infused gummies in three flavors. These products are used for stress and sleep-related issues, as well as to recover from exercise.

The company also launched 12 new SKUs (stock-keeping units) in its pet product line. These SKUs consist of chews, oils, and topical balms. These products are used to calm pets, as well as for cognition and hip- and joint-related issues.

Positive EBITDA

Charlotte’s Web is one of the few cannabis companies that have posted positive EBITDA in recent months. In the second quarter, the company reported adjusted EBITDA of 3.9 million Canadian dollars. For fiscal 2019, analysts expect the company to report adjusted EBITDA of 28.7 million Canadian dollars at an EBITDA margin of 23%.

Last month, MarketWatch reported that Korey Bauer of Foothill Capital Management spoke on the cannabis sector. He stated, “We’re going through a phase now where the companies that are doing the right things — not overspending, hunkering down — will survive, and the ones that don’t will not.”

CWEB’s year-to-date performance

Despite its recent fall, Charlotte’s Web stock has returned 4.4% YTD. The company has outperformed its peers. During the same period, the stock prices of Organigram Holdings (OGI), Cresco Labs (CL) (CRLBF), and MedMen Enterprises (MMEN) (MMNFF) have fallen by 7.9%, 13.8%, and 63.6%, respectively.

Organigram’s weak third-quarter performance and the reports of shutting down several of its cooling towers last month appear to have dragged its stock down. However, analysts are bullish on Organigram. For more analysts’ recommendations, please read Organigram Holdings: Why Analysts Are Bullish.

In its second quarter, Cresco Labs outperformed analysts’ revenue estimates. However, its net losses were higher than expected, which led to a fall in its stock price. However, the company received five licenses to sell adult cannabis in Illinois, which offset some of the declines.

Last week, MedMen reported weak fourth-quarter performance, as it missed analysts’ top-line and bottom-line expectations. Also, the termination of its merger with PharmaCann has been a drag on MedMen’s stock price.

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