John Farmer
Posted by John Farmer on Apr 3, 2019 10:18:53 AM

Charlotte's Web Q4 Revenue Up 21% - is Now the Time to Buy?

 

charlottes-web-cbd-oil-1Boulder, CO-based Charlotte's Web Holdings, Inc. (CSE:CWEB, OTCQX:CWBHF), the market share leader in hemp-derived CBD extract products, reported a solid quarter of earnings for Q4 2018 which ended December 31, with revenue up 21% to $21 million. Full year revenue for 2018 was up 74% from 2017 to just under $70 million.

Charlotte's Web focuses on the production and distribution of whole-plant hemp extract cannabidiol (CBD) wellness products, naturally containing a full spectrum of phyto-cannabinoids including CBD, terpenes, flavonoids and other beneficial hemp compounds. All CW’s hemp products are non-intoxicating.

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In other results, CW reported net income for Q4 of 2018 was $3.2 million, or $0.03 per share. Net income for full year 2018 was $11.8 million, or $0.14 per share, up 57% from 2017. Excluding IPO related costs, net income for the year was $13.1 million, or $0.16 per share, a 76% YoY increase.

CW also reported a strong gross margin of 76% of revenue. It had $73 million in cash at the end of 2018 and very low debt.

Is it a Buy?

Three months ago, Cannin Investment Group gave this stock a Strong rating. The stock has since climbed 75%, reaching $20.20 days ago. On this Q4 revenue news, it dropped 5% to $19, then climbed back to close just 1.25% off its recent high at $19.94.

The stock now has a price to sales ratio of roughly 25, quite a bit higher than 3 months ago. While still bullish overall on the stock, Cannin Investment Group now rates it at Neutral, based on its valuation. But Cannin continues to see the stock as a solid long-term investment.

Cultivation and Distribution

CW managed a massive ten-fold increase in cultivation volume from 2017 to 2018, from 63k pounds on 70 acres in 2017, to 675k pounds on 300 acres in 2018. Because hemp can be stored well in raw or extracted form, this inventory will supply all their demand in 2019 and possibly into 2020.

CW earned 57% of their revenue from ecommerce, and increased their retail presence 80% to 3,680 stores at end of 2018. Since the end of 2018, they have increased distribution to over 4000 stores.

CW’s human nutrition product sales were up 76%, topicals were up 1085%, and animal nutrition products rose 189%. They plan new products for 2019 in animal nutrition, wellness topicals and human consumables.

CW products are beginning to be sold in national brand grocery and drug chains in select states. It expects to see continued market expansion and sales gains in 2019 resulting from the Passage of the 2018 Farm Bill in late 2018, which removed hemp from the Federal Controlled Substances Act. Hemp is now a fully legal agricultural commodity governed by the USDA and FDA.

Charlotte's Web product categories include CBD Oil tinctures (liquid products), CBD capsules, CBD topicals, as well as CBD pet products.

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Source Charlotte’s Web press release

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