Charlotte’s Web Stock is Under Pressure as Q2 Earnings Disappoint

Charlotte's Web Stock

Charlotte’s Web stock is volatile in Wednesday's session after Charlotte's Web Holdings (TSX:CWEB) (OTCQX:CWBHF) reported a lower than estimated revenue and profit for the second quarter.

Revenue Soars 45%, But Below Estimates

One of the companies that have managed to build a profitable operation on the back of hemp-based CBD products is Charlotte’s Web Holdings, and currently, it is the biggest company in its particular line of business. The company released its Q2 2019 results today, and although it did manage to turn a profit, it was lower than what it generated in the prior-year quarter.

Revenues soared by as much as 45% year-over-year to hit $25 million, up from $17.2 million that it had generated in the prior-year quarter. Profits for the period stood at $2.2 million, which reflected a significant drop from the $3.7 million that the company generated in the second quarter last year.

Analysts were projecting the company to report a profit of 2 cents a share on revenue of $26.3 million.

The company also stated that 53% of its revenues were generated by its retail stores; however, at the same time, expenses shot up to $16.2 million. In the prior-year quarter, expenses came in at $8.2 million.

>> HEXO Stock: A Tale of Two Halves, So What's an Investor to Do?

Right now Charlotte’s Web stock is down 8.10% after dropping as much as 15% earlier in the day.

The company also introduced a range of new products during the quarter, including CBD gummies. Additionally, Charlotte’s Web has expanded its operations substantially and also spent heavily on R&D. This particular initiative meant that the company used up as much as $15.1 million of its operations cash in the first six months of the year. In 2018, it had only used up $6.1 million in the first half of the year.

Although the company’s profits shrunk in this quarter, it needs to be reiterated that Charlotte’s Web Holdings’ business strategy is beyond reproach and it has helped the company to emerge as the market leader in hemp-based CBD. The Farm Bill that was passed in 2018 legalized hemp in the United States and that has proven to be a particular boost for the company at large.

In addition to that, it is necessary to keep in mind that the CBD market is expected to grow at a breakneck pace over the next few years. According to one estimate, it could be worth as much as $22 billion in 2022, and Charlotte’s Web is building towards cornering a major chunk of that market.

Despite today's fall, Charlotte’s Web stock has soared over 80% in the past two months.

>> Read More Charlotte's Web News

Featured image: Canva

If You Liked This Article Click To Share