The market valuation for CBD stalwart Charlotte’s Web Holdings Inc. (TSX: CWEB) (OTCQX: CWBHF) is in a sticky situation following the release of its third-quarter earnings report.
While the long-time producer of CBD products experienced a boost in year-over-year sales, it has failed to meet analyst’s lowest consensus estimates.
The company posted a Q3 revenue of US$25.1 million, up 41.8 per cent from the same quarter last year, but missing the consensus estimate of US$32.5 million. It also reported a net loss of US$1.3 million, or US$0.01 per share — short of projected earnings of US$0.05 per share.
As a highlight the company reported an increase of 38.7 per cent in business to consumer e-commerce sales and 66.4 per cent in business to business retail sales.
The company also noted it has invested in infrastructure with the signing of a lease on a newly constructed 12,700 square-metre industrial building in Louisville, Colorado. The company said in the report the facility will be used to expand production, distribution, research and extraction capacity.
FDA clarity on CBD could bring huge boost to earnings
The move to expand production capacity is in direct relation to the company’s expectation that American retail market regulators will become friendlier toward ingestible CBD products, which drive significantly more revenue than topicals.
“Topicals account for less than 15 per cent of our sales at independent stores that carry both our topical and ingestible CBD product lines,” CEO Deanie Elsner said in the report. “This indicates the potential revenue catalyst of a broad adoption of ingestible products within the [food/drug/mass] channel.”
“We are prudently investing in the expansion of our production and distribution capacities as planned, ahead of anticipated [U.S. Food and Drug Association] regulatory clarity that could enable wider adoption of our product portfolio,” she said.
Such an announcement from the FDA could give a huge boost to the company’s share price, which has seen a 16 per cent year-to-date decrease from $14.65 to $12.28 a share.
With over 9,000 retail locations carrying their products, the company could be catching profits like flies if the news goes their way.