Charlotte’s Web Holdings, Inc. (TSE:CWEB) just released its latest quarterly report and things are not looking great. It definitely looks like a negative result overall with revenues falling 13% short of analyst estimates at US$22m. Statutory losses were US$0.13 per share, 189% bigger than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the eight analysts covering Charlotte’s Web Holdings are now predicting revenues of US$98.0m in 2020. If met, this would reflect a satisfactory 7.6% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 20% to US$0.35. Before this latest report, the consensus had been expecting revenues of US$111.4m and US$0.16 per share in losses. There’s been a definite change in sentiment in this update, with the analysts administering a notable cut to next year’s revenue estimates, while at the same time increasing their loss per share forecasts.
The average price target fell 8.0% to US$5.46, implicitly signalling that lower earnings per share are a leading indicator for Charlotte’s Web Holdings’ valuation. That’s not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Charlotte’s Web Holdings at US$10.00 per share, while the most bearish prices it at US$3.90. So we wouldn’t be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn’t rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It’s clear from the latest estimates that Charlotte’s Web Holdings’ rate of growth is expected to accelerate meaningfully, with the forecast 7.6% revenue growth noticeably faster than its historical growth of 5.8% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 34% per year. So it’s clear that despite the acceleration in growth, Charlotte’s Web Holdings is expected to grow meaningfully slower than the industry average.
The most important thing to take away is that the analysts increased their loss per share estimates for next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have forecasts for Charlotte’s Web Holdings going out to 2023, and you can see them free on our platform here.
It is also worth noting that we have found 2 warning signs for Charlotte’s Web Holdings that you need to take into consideration.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.