CVSI stock is down over 20% since CV Sciences Inc (OTCQB:CVSI) reported its third-quarter earnings, which fell short of analysts' expectations due to increased competition in the CBD market.
CVSI Stock Squeezed by Competition
The San Diego-based CBD manufacturer posted revenue of $12.6 million USD for the three months ended September 30, a drop of 7% from the same period last year. Profit for the quarter was $8.4 million, down 15% from the previous year. CVSI came out with a quarterly loss of $0.02 per share versus the Zacks Consensus Estimate of $0.01, compared to earnings of $0.03 per share a year ago. The disappointing results sent investors scurrying, with CVSI stock dropping nearly 35% on Tuesday alone.
CVSI's falling revenue is an indication of an increasingly condensed field in the CBD market, as well as a lack of clarity surrounding regulations following the passage of the Farm Act 2018. Joseph Dowling, the company's CEO, blamed the poor results on the CBD market being "flooded" with new products. He added that “the uncertain regulatory environment for CBD resulting in state-by-state ambiguities that are impacting retailer activities.” CVSI shares are currently trading at $1.64.
Some Promise for CV Sciences
The company has actually signed some impressive deals in 2019, which may stand it in good stead going forward once the regulatory environment becomes a bit clearer. Last month, CV Sciences announced that it had entered into a partnership with department store chain Harris Teeter to sell its flagship PlusCBD Oil across 150 stores in North Carolina, South Carolina, Virginia, Florida, and Maryland. That deal brings Plus CBD's retail presence to 5,400 locations throughout the US and brought about reasonable gains in CVSI stock.
While CVSI stock is down this week on underwhelming returns, it is worth noting that CV Sciences is one of the few major CBD firms in the US to steadily return a profit. Compared with industry leader Charlotte’s Web Holdings (TSX:CWEB) (OTCQX:CWBHF), CV Sciences reported free cash flow of $3 million USD in the first half of the year, while CWEB posted negative cash flow of $19.3 million USD. While Charlotte's Web may be the industry leader and operate on a much larger scale, CVSI appears to have a more viable operational model.
Featured Image: Canva