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Charlotte’s Web Q1 2020 Earnings Come with Mixed Results 

Charlotte’s Web misses on earnings for Q1 2020 but is this hemp stock still a buy?

Charlotte’s Web Q1 2020 Earnings Come with Mixed Results 

Most marijuana and hemp stocks are suffering during this year and Charlotte’s Web (OTC: CWBHF)is certainly no exception having lost nearly 47% of its value during 2020. 

Cannabis companies like Tilray (TLRY), Aurora Cannabis (ACB), and Canopy Growth (CGC) are all down 50-90% during the last calendar year – leaving many marijuana stock investors uncertain about the long-term viability of these cannabis stocks.

Today, Charlotte’s Web, the market share leader in full-spectrum cannabidiol (CBD) hemp extract products, today reported financial results for the first quarter ended March 31, 2020, and the results were mixed. 

Although the company claims that it has not been impacted by COVID-19, their operating expenses rose significantly. In fact, they’ve had a 76% increase in expenses YoY due to expanding capacity and increased production of consumer-packaged goods. This increase in operating costs, coupled with flat lining revenues, shows mixed results for this hemp stock.

Charlotte’s Web: Is this hemp stock still a buy in 2020?

Charlotte’s Web Q1 2020 Earnings Come with Mixed Results 

Charlotte’s Web Q1 2020 Earnings Come with Mixed Results Thankfully, Charlotte’s Web has recently expanded its retail footprint to over 11,000 stores nationwide. They also made their first foray into the CBD pet product market through a partnership. The Company also signed an agreement to acquire Abacus Health Products back in Marck 2020 in an all-stock deal. Charlotte’s Web management expects this deal to close by the fall of 2020 but is contingent upon Abacus shareholders’ approval.

Abacus Health has built an impressive portfolio of topical CBD SKUs which are sold through more than 12,000 retail units in 3 of the largest pharmacy chains in the US.

This is an exciting acquisition opportunity for Charlotte’s Web because, upon successful completion, Charlotte’s Web would acquire nearly 35% market share in the retail segment – establishing an important foothold Charlotte’s Web path to CBD dominance. 

Speaking about 2020’s expectations during the call, Charlotte’s Web CFO Russ Hammer said, “We are modeling for revenue growth of 10% to 20% in 2020 and a return to positive adjusted EBITDA by the end of the year.” He also said, “As our new facilities come online later in the year, we expect to harness cost savings through our vertically integrated supply chain to support meaningful increases in adjusted EBITDA, and then continue to leverage against higher revenue as we enter 2021 and 2022.”

Charlotte’s Web: Why is this hemp stock is a buy for 2020?

Although Charlotte’s Web has underperformed many of its cannabis industry peers during 2020, we believe that strong Q1 sales could drive this hemp stock’s price up. If and when the acquisition of Abacus is successful, they’ll control substantial market share in the US.

We believe there’s still significant long-term growth potential for this hemp stock as Charlotte’s Web has many strengths going for it:

  • a leading market position in a rapidly growing segment
  • an established and trusted brand
  • positive industry trends supporting its continued growth (legalization, growing popularity)
  • a track record of new products to expand its portfolio
  • a focus on consumer-centric branding
  • scalable cultivation and production platforms
  • good financial performance, including consistent revenue growth, and profits
    strong management team

We are encouraged that the management is focused on shareholder value and strong profit margins in the future. Given that its current valuation is not unreasonably high, we give this company a strong rating as a potential long-term hemp stock investment.

See the full financial results report here.

Charlotte’s Web Q1 2020 Earnings Come with Mixed Results 

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