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Charlotte’s Web Holdings: Will this Hemp Stock Stage a Rebound in 2022?

Charlotte’s Web Holdings: Will this Hemp Stock Stage a Rebound in 2020?Like most hemp stocks, Charlotte’s Web Holdings (OTC: CWBHF) has seen volatile trading since the stock went public in September 2018. The hemp stock’s market value dropped over 50% since January 2020 amid gloomy financials and depressed business circumstances. In fact, CWBHF is currently trading at about 20% of its value from this time last year.  But will this hemp stock stage a rebound in 2022?

In the last three months, the company saw a 20% plunge in its share price. However, Charlotte’s Web saw a sudden jump in the last week. This increase happened amid optimism over a rebound in business during Q2 – after its peer cbdMD declared the highest ever sales in its quarterly update.

Related: Sunniva Revenue Rebounds. Stock Dips 17%. Time to buy?

Declining sales and lack of profitability have hemp stock investors concerned

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In 2019, Charlotte’s Web Holdings experienced a 30% annual increase in sales. However, during Q1 of 2020, the company’s sales were flat due to the Covid-19 pandemic when most of the retail stores of the pot company had to be shut down.

As a result, its revenue was adversely impacted. Not just this, in the first quarter, Charlotte’s Web also posted $5.21M as a pre-tax loss. Even for its upcoming quarter, Cantor Fitzgerald’s analyst Pablo Zuanic expects the sales to come in 10% lower than market expectations.

Related: Top 5 Dividend Paying Marijuana Stocks

As the US and Canadian economy have started to open up, we can expect that things should begin to look up for the hemp stock.

Abacus acquisition and upcoming regulatory policy lends strength

Charlotte’s Web Holdings: Will this Hemp Stock Stage a Rebound in 2020?

Charlotte’s acquisition of Abacus Health is proving to have been one of its best strategic moves. In 2019, Abacus saw a whopping year-on-year (YoY) growth of more than 80% in its revenue. Joining forces with Abacus has helped Charlotte’s Web to command a substantial portion of the hemp industry in the US.

The retail stores are beginning to open up and the pot company expects growth of between 10% to 20% for FY2020. This forecast is without considering the acquisition of Abacus Health. Charlotte’s Web also predicts that it would break-even in terms of its adjusted EBITDA. The company is also well on track for cost reduction.

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Besides this, there is another development on the regulatory front which could boost the overall cannabis sector. On July 22, the U.S. Food and Drug Administration submitted its draft of the CBD Enforcement Policy to the White House.

This policy is mainly targeted to lay a guiding framework for the under-regulated hemp industry. While the outcome for this is awaited, once enforced, this policy could be a game-changer for this hemp stock and other hemp stocks.

Cash balance and valuation looks promising

Charlotte’s Web Holdings: Will this Hemp Stock Stage a Rebound in 2020?

In a nutshell, the hemp stock is currently struggling but seems well-positioned for the future. It doesn’t have a huge pile of debt and it has more than $50 million as a cash balance.  Pablo Zuanic from Cantor Fitzgerald, despite lowering its price target on the stock, believes Charlotte’s Web is “a much stronger company” post the acquisition of Abacus, given its market penetration in CBD topicals.

The hemp stock is also trading at an attractive valuation with a forward price to sales multiple of 4.6x. However, things will become clearer as the regulatory landscape matures and the hemp company announces its Q2 results in September.

Charlotte’s Web Holdings: Will this Hemp Stock Stage a Rebound in 2022?

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