Posted in CBD Stocks

Why Charlotte’s Web Stock Unraveled Today

 Posted by  Posted on August 12, 2021

a hand holding a blue umbrella: Why Charlotte's Web Stock Unraveled Today © Provided by The Motley Fool Why Charlotte’s Web Stock Unraveled Today

What happened

Shares of hemp-oil hawker Charlotte’s Web Holdings (OTC: CWBHF) fell 3.9% through 10:20 a.m. EDT after the company reported what appeared to be an earnings beat for fiscal Q2 2021 — $0.04 per share lost where Wall Street had forecast a loss of $0.05 per share.

That’s the good news. The bad news is that Charlotte’s Web’s revenues didn’t measure up to expectations. Instead of the $28.4 million in sales that analysts had forecast, Charlotte’s Web reported sales of just $24.2 million.    

a hand holding a blue umbrella: Kid looking through a magnifying glass at a spider in a web © Getty Images Kid looking through a magnifying glass at a spider in a web

So what

Charlotte’s Web claimed that it expanded its already No. 1 market share position in CBD Q2, and its sales did grow 11.4% year over year. Most sales — about 65% — were made direct-to-consumer over the internet, but this revenue stream grew only 1% year over year. Where the company experienced growth, it was in business-to-business sales, which were up 38%.

All of the above is what you’d expect to see in an opening economy in which people resume venturing out to shop at physical stores, and Charlotte’s Web confirmed that “many consumers transitioned from online shopping back to brick and mortar retail” in the quarter, noting that “this was especially evident within our largest and most established medical and healthcare practitioner channels.”

Gallery: 10 Top Stocks to Buy This Month if You’re Worried About Another Market Crash (The Motley Fool)

a man wearing a suit and tie: Stocks have been all over the place lately, and investors are growing increasingly concerned about another market crash as coronavirus cases soar worldwide and inflation continues to ramp up. While it’s impossible to predict exactly when the next crash will occur, it’s always a good time to strengthen your portfolio with quality long-term investments that can deliver returns amid a myriad of market trends.To that end, let’s take a look at 10 stocks to consider adding to your buy basket if you’re worried about another market crash.5 Winning Stocks Under $49We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Now what

What’s surprising here is that you ordinarily expect direct-to-consumer sales to be more profitable than the other kind, but in Charlotte’s Web’s case, it seems the opposite was true. Gross profit margins in the quarter grew 1260 basis points to 65.5%.

What’s more, going forward, Charlotte’s Web “anticipates [further] gross profit improvements as its new production and fulfillment facility becomes fully operational.” With operating costs declining, moreover, I’d say that by and large things are looking up for Charlotte’s Web despite the quarterly loss — and investors selling the stock today may well be making the wrong call.

SPONSORED:

10 stocks we like better than Charlotte’s Web

When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Charlotte’s Web wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of August 9, 2021

 

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Charlotte’s Web Holdings. The Motley Fool recommends Charlotte’s Web. The Motley Fool has a disclosure policy.

Author: CSN