After cbdMD's Q4 Print, Analyst Sees No 'Clear Path' To Company's Positive EBITDA Guidance

CBD company cbdMD Inc. YCBD reported fourth-quarter unaudited net sales of $9.54 million Wednesday and audited net sales for fiscal year 2019 of $23.7 million.

The company posted unaudited net income for the quarter of $7.6 million and a net loss of the fiscal year of $50.4 million, or $2.82 per share.

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The Analyst

Cantor Fitzgerald's Pablo Zuanic reiterated a Neutral rating on cbdMD with a $3.40 price target.

The Investment Thesis

While cbdMD matched its fourth-quarter sales guidance of 20% sequential growth, its profit metrics showed little progress, Zuanic said he in a Thursday note. (See his track record here.) 

The company is projecting positive EBITDA by October 2020, earlier than prior guidance for January 2021, the analyst said. 

When compared to the peers, cbdMD’s “current and projected growth pace is notable,” Zuanic said.

“Taking the fully diluted share count at 44.7mn, we estimate YCBD trades at 3.5x current sales (market cap $139 = $3.11x44.7mn; net cash of $4.7Mn; sales of $9.5x4) at 1.9x the high end of FY20 sales guidance.”

Cantor Fitzgerald needs more convincing when it comes to cbdMD's positive EBITDA guidance, he said. 

“Gross margin in 4Q dropped to 51% from 60% plus in the first nine months. Operating expenses before impairments only dropped to 140% of sales vs. 156% in the Jun qtr; management said this will improve by April), but a clear path to positive EBITDA (by Oct) was not provided.”

The company’s new and ongoing sponsorships and brand awards all raise brand awareness for cbdMD and its pet line Paw CBD. the analyst said. 

Price Action

The stock was trading down 6.05% at $2.95 at the time of publication. 

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Photo courtesy of cbdMD.