Charlotte’s Web Holdings has a 56 per cent upside, says PI Financial

No surprises in first quarter results from US cannabis play Charlotte’s Web Holdings (Charlotte’s Web Holdings Stock Quote, Chart CSE:CWEB), according to PI Financial analyst Jason Zandberg, who in an earnings update to clients on Wednesday maintained his “Buy” rating and C$30.00 target.

Boulder, Colorado-based Charlotte’s Web announced its fiscal Q1 on Tuesday, having earlier this month released preliminary results for the same period. The company reported revenue of $21.7 million, up 66 per cent year-over-year, and EBITDA of $4.5 million, down two per cent year-over-year, and EPS of $0.02 per share versus last year’s Q1 of $0.04 per share. (All figures in US dollars unless noted otherwise.)

Zandberg points out that CWEB has now shipped first orders to three national brand supermarket/grocery and drugstore retailers in select states, with shipments to a fourth commencing post-Q1. Also, e-commerce sales, which accounted for 49 per cent of total sales in the quarter, grew by 60 per cent year-over-year, with CWEB having initiated digital advertising and e-commerce pilot programs with Google and Amazon over the quarter.

“Management maintains revenue guidance of between $120 million and $170 million and EBITDA guidance of between 30 per cent and 35 per cent for fiscal 2019, therefore we do not have any major changes to our fiscal 2019 forecasts,” says Zandberg.

“CWEB also announced that it will be uplisting to the TSX on Friday, May 31 – the first US-based CBD company to list on a major exchange highlighting the improving regulatory environment for hemp and CBD in the US and Canada. We note that the FDA will hold a public hearing on Friday on how to regulate CBD products,” he says.

Zandberg thinks CWEB will generate fiscal 2019 revenue and EBITDA of $142.9 million and $43.7 million, respectively, and fiscal 2020 revenue and EBITDA of $304.2 million and $102.2 million, respectively. The analyst’s C$30.00 target price represented a projected return of 55.8 per cent at the time of publication.