Charlotte’s Web Holdings Inc (OTCMKTS: CWBHF) upward momentum has lost its spark as short sellers continue to take the fight to the bulls. The stock is edging lower as part of a major correction from all-time highs. A 30% plus pullback exposes the stock to a crucial support level.
The big question now is whether the stock has what it takes to bounce off, the crucial support level, or will continue to edge lower.
Charlotte’s Web Holdings Price Analysis
The plunge comes on the heels of the company confirming a public offering of 7 million shares for total gross proceeds of C$140 million. The company has also tabled preliminary financial results for Q1 that underline core business growth.
Revenue growth supplemented by net income and gross margin expansions are some of the milestones that justify why Charlotte’s Web Holdings deserves a higher valuation amidst the recent plunge.
The recent pullback has exposed the stock to the $14 support level. Above the critical support level, the stock remains supported for further upside action as a bull play. However, a breach of the support level could result in short sellers pilling more pressure, which could result in the stock plunging to this year’s lows.
Charlotte’s Web Holdings needs to hold above the $14 support level if it is to have any chance of resuming the long-term uptrend after the recent pullback.
What Does Charlotte’s Web Holdings Do?
Charlotte’s Web Holdings is engaged in the production and distribution of hemp-based cannabidiol wellness products. The company’s product pipeline is made up of tinctures, capsules as well as topical products. The company sales its products through brick and mortar stores as well as its e-commerce platform.
Revenue Margins Growth
While Charlotte’s Web Holdings has taken a significant hit in recent trading sessions, underlying fundamentals, remain solid as ever. The company has confirmed it expects consolidated revenues of between $21 million and $22 million for the first quarter, representing a 70% year over year growth.
In addition, the company expects gross margin to range between 70% and 75% with e-commerce sales accounting for 50% of total sales. Adjusted EBITDA, on the other hand, could range between $4 million and $4.5 million as well net income ranges between $2 million and $2.5 million.
Buoyed by Q1 performance, the management expects the company to generate revenues of between $120 million and $170 million for the full year.
“Where our final 2019 annual sales figure lands in this range will be determined primarily by the roll-out pace with national retailers, their associated SKU uptake, and associated in-store sales velocities. E-Commerce sales rates through both our online store and third-party e-commerce platforms will be the other primary factor along with the success and traction of new products and categories we will be introducing this year,” explained CEO, Hess Moallem.
Retail Network Expansion
Some of the key milestones achieved in Q1 that sets the stage for Charlotte’s Web Holdings to have an impressive year includes the expansion into 6,000 retail locations. The company added more than 2,3000 retail locations to its distribution network, in the quarter, as it continued to strengthen its sales channels.
Charlotte’s Web has also expanded its canine-focused pet products by launching an all-new 12 SKU lineup comprising of hemp-extract infused chews, flavored and in flavored oils.
The company has also doubled the number of acres in which it has planted hemp from 300 acres as of 2018. The Expansion drive is part of an effort of ensuring there is sufficient hemp product to meet the anticipated demand in 2020 and 2021.
Charlotte’s Web Holdings is still up for the year despite the steep pullback from one-year highs. The pullback could as well be because of investors taking profits after a 100% plus spike in the first quarter.
The steep pullback provides an exciting entry position as Charlotte’s Web Holdings is a fundamentally attractive investment. Revenue growth, as well as gross margin expansion, are some of the milestones that underline why the stock deserves a higher valuation amidst the steep pullback.
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Disclosure: We have no position in CWBHF and have not been compensated for this article.