Weak retail figures were offset by robust direct-to-consumer sales for US CBD company Charlotte\u2019s Web Holdings (Charlotte\u2019s Web Holdings Stock Quote, Chart, News TSX:CWEB), according to analyst Jason Zandberg of PI Financial. In an earnings update to clients on Tuesday, Zandberg kept his \u201cBuy\u201d rating and C$10.00 target unchanged, saying a lot for CWEB depends on when and how regulations surrounding CBD in the US pan out. Boulder, Colorado-based Charlotte\u2019s Web, a producer and distributor of hemp-based CBD products, announced its second quarter 2020 results on Monday, coming in with consolidated revenue of $21.6 million compared with $25.0 million a year ago. Adjusted EBITDA was a loss of $5.7 million compared to positive $3.8 million for Q2 2019. (All figures in US dollars except where noted otherwise.) The company said in its report that COVID-19 has had its effect on retail and health practitioner sales channels due to decreased foot traffic into stores and temporary location closures. The quarter was nonetheless eventful for CWEB, which closed on its acquisition of Abacus Health Products, a US leader in over-the-counter topical products combining active pharmaceutical ingredients with hemp extract. \u201cSecond quarter revenue was below expectations due to the impact of COVID-19 on retail sales,\u201d said Deanie Elsner, CEO of Charlotte's Web, in a press release. \u201cHowever, our DTC sales increased 33.6 per cent, largely offsetting declines in B2B retail sales.\u00a0We made excellent progress building out our infrastructure and expanding our products portfolio with the closing of the Abacus acquisition. Abacus CBD Medic products are now being sold through our online store and we look forward to realizing more cross-selling revenue synergies with Abacus through our FDM partners.\u201d Charlotte\u2019s Web ended the second quarter with cash and cash equivalents of $99.8 million compared to $53.0 million for the end of the previous quarter. Zandberg said the Q2 revenue was in line with his expectations while the $5.7-million EBITDA loss was better than his estimated loss of $6.5 million. Zandberg said CWEB\u2019s CBD gummy product line did well over the quarter, with sales growing 500 per cent year-over-year and now accounting for 20 per cent of the company\u2019s overall product revenue. At the same time, the company saw topical CBD product sales decline by 49 per cent year-over-year. Zandberg noted that the Abacus acquisition, which closed on June 11, represented $0.6 million in sales during its shortened contribution to the quarter. \u201cCWEB recorded negative EBITDA of ($5.7 million). This is the third consecutive quarter of negative EBITDA as gross margins declined to 53 per cent (75 per cent last year) and SG&A expenses represented 129 per cent of revenue. Gross margins face headwinds due to competitive pressures but we expect SG&A costs to decline as a percentage of revenue as CWEB integrates efficiencies with Abacus,\u201d Zandberg wrote. \u201cThe biggest catalyst for CWEB, in our opinion, is the regulatory environment within the CBD market that is currently non-existent and requires changes. We are watching the pending legislation surrounding hemp-based CBD dietary supplements (Bill HR 8179) which was introduced in the US House of Representatives in early September. We believe enforceable regulations will eliminate unfair competitive practices and should positively impact CWEB\u2019s share price,\u201d Zandberg argued. Looking ahead, the analyst is calling for fiscal 2020 revenue and EBITDA of $111.2 million and negative $23.5 million, respectively, and for fiscal 2021 revenue and EBITDA of $166.6 million and $27.1 million, respectively. At press time, Zandberg\u2019s C$10.00 target represented a projected 12-month return of 166 per cent.