Charlotte's Web stock is sinking today after Charlotte's Web Holdings (TSX:CWEB) (OTCQX:CWBHF) posted its third-quarter earnings, which fell short of analysts' expectations as the market for CBD products becomes increasingly condensed.
Charlotte's Web Stock Down on Disappointing Revenue
The CBD company posted revenues of $25.1 million USD, which missed analysts' expected figure of $32.51 million USD. Charlotte's Web reported a net loss of $0.01 per share, while analysts expected profits of $0.05 per share. Revenue actually grew 41.5% from the same period last year, boosted by a range of new products and its retail presence in over 9,000 locations across North America. However, this wasn't enough to drive gains in Charlotte's Web stock.
Adjusted EBITDA of $0.7 million USD was well short of last year's figure of $5.3 million USD, due in large part to a lower gross margin, increased operational expenses, and investment in growth initiatives, such as its new Louisville, Colorado location. Completion of that 136,000 square foot facility, which is equipped to handle cultivation, production, extraction, and R&D operations, is expected in Q3 2020 and could be a major boost for Charlotte's Web stock is gaining an edge over the competition.
Political Support Moves in Favor of CBD Industry
While CEO Deanie Elsner touted the Charlotte's Web Holdings brand as the standout brand in a crowded market, pointing to a 68% year-over-year increase in traffic through its online store as proof, she argued that real growth for the company cannot be achieved until the CBD industry receives broader regulatory support. Investors in Charlotte's Web stock can take solace in the fact that the pendulum of political support appears to be swinging in favor of the industry.
Last year, the passage of the updated US Farm Bill federally legalized the cultivation and sale of hemp-derived products, such as CBD, which was a major boost for Charlotte's Web as an industry leader. Then, earlier this year, the SAFE Banking Act was passed, allowing for cannabis firms in the US to access essential banking services. 2020 is shaping up to be a big year for the industry, with cannabis legislation set to be a key policy point in the presidential election.
Charlotte's Web shares are currently trading at $12.50 on the Toronto Stock Exchange.
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