Charlotte’s Web is one of the most trusted CBD companies out there. Its premium quality proprietary hemp genetics are grown purely in American farms only through certified organic practices and that has helped it become the most sold CBD brand in the US with distribution in over 22,000 retail stores. The hemp stock is currently trading at all time lows and about 25% below median price target – but should you buy this hemp stock before tomorrow’s Q4 results?
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Even though the company has decent fundamentals, the markets have not been impressed with the hemp stock. Its sales for the period ended September 30, 2020, increased only by 0.4% compared to that of the previous year, totaling around $25.2 million.
The only place where the company seems to grow is in its delivery. Charlotte’s delivered to over 22,000 stores, more than double the 9,000 stores that it delivered to as of September 30, 2019, but this counts for little if the sales numbers don’t increase. It’s business-to-business (B2B) sales fell 29.2% as demand fell during the pandemic.
Charlotte’s Web’s revenue decreased 8% in the September quarter and it reported a net loss of $6.5 million compared to $1.3 million in 2019. A key corner to cut costs will be in its cost of operations. Operating expenses for the last three quarters were $81.1 million, around 65.2% higher than in 2019.
What Will Q4 Hold for Charlotte’s Web?
The company’s Q4 results are expected to be released on March 24th and the main thing all the investors would be looking keenly is its revenue growth. For the past five quarters, the company has seen only losses and there is not a better time than now to cut operating costs and improve performance.
The company acquired Abacus Health in the June quarter and it helped them to increase revenues by $2.5 million. The revenue for Q4 also depends on Abacus’s contribution.
The December quarter saw an ease in lockdown and that should help the sales figures. However, it remains to be seen if the company will turn around its P&L statement.
As the vaccine rollout quickens and lockdowns become a thing of the past – sales should start increasing. The company focused on sales quarter-by-quarter instead of year on year. “Real-time improvement in our business performance becomes more evident when we look at the Q3 sales on a quarter-over-quarter basis. Consolidated Q3 revenue of $25.2 million was up 17% quarter over quarter, making the important return to consecutive quarterly growth in both our direct to the consumer business, which was up 8%, and our B2B business, which was up 39%; well ahead of our recent Q2 results,” said Deanie Elsner, CEO, Charlotte’s Web.
The importance of Abacus comes into the picture when you see that when Abacus is excluded, legacy Charlotte’s Web delivered total sequential quarterly growth of only 8%. Legacy B2B increased only 12%. Clearly, Charlotte’s Web needs to find a way to increase revenue.
If Charlotte’s Web looks at its product mix, it might find the answer there. Tinctures were up 2% q-o-q, capsules were up 9%, gummies were up 41%, pet was up 12% and topicals were up 169%. It’s clear what consumers are buying. The company also has sales through its website. A key factor in Charlotte’s favor is that it donates a small portion of its pre-tax earnings to various charitable organizations. but should you buy this hemp stock before tomorrow’s Q4 results?
Bottom Line: Should You Buy This Hemp Stock Before Q4 Results on March 24th?
It is estimated that, by 2024, the market for CBD products will grow to $20 billion. CBD products are medicinal and hence can be sold in any market. If Charlotte’s Web manages to turn things around and increases sales, it should be a solid hemp stock to buy. You may want to wait until Q4 numbers come out on March 24 before taking a decision on this hemp stock.
Should You Buy This Hemp Stock Before Tomorrow’s Q4 Results?
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