M Partners analyst Damian Karp is bullish on US cannabis company Charlotte’s Web Holdings (Charlotte’s Web Holdings Stock Quote, Chart CSE:CWEB), saying the makers of CBD wellness products should be able to maintain its market-leading position as it expands both domestically and internationally.
In a research note to clients Monday, Karp reiterated his “Buy” rating and C$35.00 target for CWEB, which represents a projected return of 19 per cent at the time of publication.
M Partners began covering Charlotte’s Web back in November 2018, with CWEB’s share price jumping 111 per cent since then. Karp has now revised his valuation methodology from a production-driven model to a demand-driven model, and thus his estimates have changed.
“The new methodology more accurately reflects Charlotte’s Web’s operations as its products make their way into more retail channels in the US,” Karp says. “We expect to see more retail presence in the near future to add to the CVS Health Corporation partnership and shipments of its first product orders to three national retail, grocery and drug chains. We view these partnerships as transformative and significant drivers of future growth.”
Karp is expecting CWEB to generate fiscal 2019 revenue and EBITDA of $251.0 million and $70.6 million, respectively, and fiscal 2020 revenue and EBITDA of $528.2 million and $198.4 million, respectively. (All figures in US dollars unless noted otherwise.)
As for potential catalysts, the analyst points to further consumer packaged goods partnerships, new stock-keeping units and product formulations, expansion updates and a potential listing on either the TSX or a US exchange.