Charlotte’s Web stock fell by over 2% to $18.85 in Thursday’s session despite Benchmark giving Charlotte’s Web Holdings (CSE:CWEB) (OTCQX:CWBHF) a buy rating and setting a price target of $25. Benchmark’s price target gives the company an upside potential of 30% from the current market price.
Why the Increase in Price Target?
According to analyst Mike Hickey, there is a range of positives for Charlotte’s Web stock such as the early mover advantage in the market, the expansion of its retail network, and its vertically integrated business model. In a note, Hickey indicated that Charlotte’s Web stock is among the leading stock in the US CBD market with its established brand of over 4,000 retail distribution outlets and online sales.
With the legalization of hemp through the 2018 Farm Bill, the company is well positioned in the CBD market and will benefit greatly from this position if the market achieves its predicted $7 billion by 2023.
Q4 2018 Financial Results
The release of Q4 2018 financial results on March 28 alleviated concerns about the growth of Charlotte’s Web Holdings and set momentum going for 2019. The company reported a 21% growth in revenue in Q4 2018 and 72% from last year to approximately $21.5 million. Although the company’s gross margin dropped to 72%, it is still relatively high compared to other cannabis companies. After a slowdown in momentum in Q3, sales returned to positive growth in the fourth quarter.
At the beginning of 2019, Charlotte’s Web had $73 million of outstanding cash with external debt. However, 32% of the outstanding shares of Charlotte’s Web stock is held by the founding family through proportional voting stock, leaving a tight float of 22 million of the common stock being offered as part of the RTO process.
Recently the company filed a shelf prospectus aimed at raising $500 million that will cushion it in the event it needs additional capital.
Charlotte’s Web stock has doubled this year and outperformed the overall cannabis sector.
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