Charlotte’s Web stock is the biggest loser in the cannabis sector after Charlotte’s Web Holdings (CSE:CWEB) (OTCQX:CWBHF) announced its preliminary first quarter 2019 financial results. Moreover, the company priced its previously announced underwritten public offering of an aggregate of 7 million common shares at a price of $20.00 CAD a share.
Q1 2019 Financial Highlights
In the Q1 2019, Charlotte’s Web Holdings witnessed a 70% year-over-year sales increase, particularly in the month of March when the company had record sales estimated at $8 million. The company reported organic revenue of almost $22 million and around 50% of the revenue was mainly from e-commerce sales. Net income for the quarter ranged between $2 million and $2.5 million, while adjusted EBITDA ranged between $4 million and $4.5 million.
This was the first full quarter since the passing of the 2018 Farm Bill, which was a significant milestone in the hemp industry. As a result, Charlotte’s Web is now distributing its products to four brand grocery and drugstore outlets. Three of the four accounts are currently offering topical products. The company has over 6,000 outlets across the US with over 2,300 being added since the beginning of the year. The company also increased its hemp harvest from 63,000 pounds in 2017 to 675,000 in 2019 with the figure expected to double this year—all of which sounds like good news for Charlotte’s Web stock.
Yet currently, CWBHF stock is down 14.65%, now selling at $14.75 USD on the OTC market. CWEB stock is down 14.20% on the CSE. So why is Charlotte’s Web stock dropping right now?
Charlotte’s Web Holdings is estimating its 2019 revenue to range between $120 million and $170 million. The 2019 revenue will depend on the roll-out pace with national retailers, its SKU uptake, and other in-store sales. Equally, e-commerce sales through the company’s online store and those of third-party platforms will contribute greatly to the success and traction of the new product categories that the company intends to launch this year.
Although quarterly results vary, Charlotte’s Web expects adjusted EBITDA and gross margins to range between 30% to 35% and 70% to 75% respectively this year. The company plans to add more stores in 2019.
Fundraising at Deep Discount
Additionally, Charlotte’s Web Holdings announced that it will sell 7 million common shares of Charlotte’s Web stock at a price of $20.00 CAD per share for total gross proceeds of approximately $140 million CAD. The announced price is at a discount of 15% from Wednesday’s closing price.
Charlotte’s Web is expected to report its results at the end of May 2019.
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