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Charlotte’s Web Down 6% As Pandemic Fallout Causes Earnings Miss
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Charlotte’s Web Down 6% As Pandemic Fallout Causes Earnings Miss

Charlotte’s Web, the maker of hemp-based CBD (cannabidiol) wellness products, missed analysts’ 2Q estimates as COVID-19 led disruption impacted the company’s operations. The stock is currently trading down 6%.

Charlotte’s Web’s (CWBHF) 2Q revenue declined 13.6% Y/Y to $21.6 million as retail and health practitioner channels experienced lower foot traffic and temporary location closures due to the pandemic. The 33.6% growth in the company’s DTC (direct-to-consumer) e-commerce revenue to $15.5 million was not enough to offset the 54.5% fall in the company’s B2B (business-to-business) revenue to $6.1 million.

Weak revenue led to a loss of $0.13 per share compared to EPS of $0.02 in the second quarter of the previous year. Analysts were expecting loss per share of $0.04 on revenue of $24.9 million.

Looking ahead, the company’s CFO Russ Hammer stated, “We are seeing improvements and a stronger back half in our DTC channel, but without a meaningful opening up of the economy and health practitioner channel we expect only flat to modest consolidated net revenue growth for 2020.”

The CFO added, “Our long view market opportunity remains intact and we continue to add new customers, doors, and products. Our Q3 revenues are trending ahead of Q2 sales levels and we anticipate reopening of retail locations in the U.S. will support a positive growth trend. As we see resolutions in COVID-19 and hemp CBD regulations or legislation we can see the category build towards its full potential.”

Cantor Fitzgerald analyst Pablo Zuanic has a hold rating on the stock, and recently reduced his price target from $5.85 to $5.25 due to concerns around the company’s near-term prospects stemming from a potential 2Q miss and the proforma guidance being set below consensus expectations.

However, despite the near-term concerns, Zuanic stated that Charlotte’s Web is “a much stronger company” after the acquisition of Abacus, given its market penetration in CBD topicals and as regulations become clearer. (See CWBHF stock analysis on TipRanks)

In June, Charlotte’s Web completed the acquisition of Abacus Health Products, a leading provider of over-the-counter topical products for pain relief and skincare containing CBD hemp extracts. Year-to-date, CWBHF stock has fallen about 61%. Zuanic’s price target indicates an upside potential of about 74.7% in the coming months.

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