Cantor Cuts Charlotte's Web Target On Tough 2Q, Reduced Guidance

Charlotte's Web Holdings’ CWBHF second-quarter results highlighted the lack of EBITDA growth and improvement in free cash flow, according to Cantor Fitzgerald.

The Charlotte's Web Holdings Analyst: Pablo Zuanic maintained a neutral rating for Charlotte's Web Holdings, while reducing the price target from $5.25 to $3.90.

The Charlotte's Web Holdings Thesis: The Boulder, Colorado-based company reported its second-quarter sales 15% below the consensus estimate. It also announced its fiscal 2020 guidance excluding the Abacus deal around 20% below Street expectations..

Zuanic said in the note that performance may have bottomed in the second quarter, “with new doors, brand/format innovation, and the cross-selling synergies from Abacus, combined with a gradually improving macro backdrop,” pointing to a ramp up in performance in the back half of the year.

“Moreover, brand loyalty metrics, increased scientific back-up, and overall footprint expansion, should allow Charlotte’s Web to continue to outperform the industry in this phase of both macro and reg uncertainty,” the analyst wrote.

“A more consolidated industry and new and strict FDA guidelines by mid-2021, should help grow the industry 3-5x from current levels over the next four years, according to management,” he added.

CWBHF Price Action: Shares of Charlotte's Web Holdings had declined by 2.13% to $2.76 at the time of publication Tuesday.

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