August 15 was not a good day for investors in Charlotte’s Web (OTC:CWBHF) stock. Hopefully you weren’t heavily allocated when the shares slid 6.6% and the stock message boards were overrun with bears — many of them Charlotte’s Web stock bulls just a day prior.
The culprit behind the sudden sentiment change? Second-quarter earnings. Though CWBHF saw huge revenue jumps from past quarters, those jumps fell short consensus estimates. Nonetheless, I suspect that a turnaround is imminent for Charlotte’s Web stock and the bears will go back into hibernation — and I’ve got more than a gut feeling to back up my bullish outlook.
Detailing the Bear Raid on CWBHF Stock
In the case of Charlotte’s Web stock, I see this as a market overreaction to heightened analyst expectations. Sure, there’s also the fact that the cannabis market as a whole declined throughout the summer, but it’s the post-earnings drop that pressured a lot of weak hands to bail on CWBHF stock.
So, let’s break it down: as reported by the company for the second quarter of 2019, Charlotte’s Web’s revenues increased by a whopping 45% year-over-year to $25 million (in American dollars, not Canadian). You’d think that 45% would have been more than enough revenue growth, but analysts were expecting the dollar figure to be $27.8 million, so the bar was set quite high — too high, in my humble opinion.
I’m equally impressed with the second-quarter increase in Charlotte’s Web’s growing capacity. As the company has reported, the total number of acres of cannabis planted increased to 862 this year, representing 182% more than the already considerable 300 acres planted last year. As a point of reference, the 300 acres’ worth of cannabis planted by Charlotte’s Web in 2018 produced an astounding 675,000 pounds of salable hemp product.
A Little Giant in the CBD Space
And so, while the analysts and naysayers weren’t impressed, I liked the numbers I saw with Charlotte’s Web’s earnings release. Sure, it’s not the biggest cannabis company or even the largest CBD-focused company, but Charlotte’s Web has been growing by leaps and bounds and that’s the stuff that stock-market wealth is made of.
Indeed, with giant retailers like CVS (NYSE:CVS) and Kroger (NYSE:KR) stocking the company’s products on their shelves, I expect Charlotte’s Web to become a household name in the near future. I can just see it now: soccer moms picking up a batch of Charlotte’s Web CBD oil, capsules, or gummies along with their milk and eggs…
That might sound humorous, but it’s not as outlandish as you might think. Deanie Elsner, the CEO of Charlotte’s Web, clearly envisions the mainstreaming of the company’s CBD products as an imminent event:
“We have been experiencing increased sales through both our e-commerce and retail sales channels. Top-tier mass retailers are entering the market as several national grocery and drugstore brands have announced their CBD plans. The majority of these are now carrying Charlotte’s Web products. This is a significant development for the hemp CBD category.”
Delivering CBD to Your Doorstep… And Value to Shareholders
But don’t get the wrong idea — Charlotte’s Web’s future isn’t just about getting the company’s products on store shelves. Perusing the company’s website, there’s little doubt that Charlotte’s Web is pushing hard for online shopping and home delivery, along with its subscription service — a shopping feature that millennial consumers have become accustomed to.
The Charlotte’s Web Autoship Program is, I must admit, hard to resist: a 10% discount on subscription orders, free two-day shipping on the first order, and every seventh order is free. Granted, the company’s CBD products aren’t the cheapest on the market, but I’ve never heard anyone complain about the quality, and Charlotte’s Web’s proprietary hemp genetics simply can’t be replicated by competitors.
The Bottom Line on Charlotte’s Web Stock
There’s no shortage of cannabis stock to choose from, and I won’t deny that there’s competition in the CBD product niche. Still, with interest from well-established retailers and a savvy subscription service for online shoppers, Charlotte’s Web and CWBHF stock are setting up for a powerful post-summer recovery.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.