Newsflash: Charlotte's Web Holdings, Inc. (TSE:CWEB) Analysts Have Been Trimming Their Revenue Forecasts

One thing we could say about the analysts on Charlotte's Web Holdings, Inc. (TSE:CWEB) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the most recent consensus for Charlotte's Web Holdings from its seven analysts is for revenues of US$104m in 2021 which, if met, would be a reasonable 4.7% increase on its sales over the past 12 months. Losses are predicted to fall substantially, shrinking 37% to US$0.23. Yet before this consensus update, the analysts had been forecasting revenues of US$118m and losses of US$0.23 per share in 2021. So there's definitely been a change in sentiment in this update, with the analysts administering a substantial haircut to this year's revenue estimates, while at the same time holding losses per share steady.

Check out our latest analysis for Charlotte's Web Holdings

the analysts have cut their price target 11% to US$4.97 per share, signalling that the declining revenue and ongoing losses are contributing to the lower valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Charlotte's Web Holdings analyst has a price target of US$8.03 per share, while the most pessimistic values it at US$5.18. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Charlotte's Web Holdings' past performance and to peers in the same industry. We would highlight that Charlotte's Web Holdings' revenue growth is expected to slow, with the forecast 9.7% annualised growth rate until the end of 2021 being well below the historical 16% p.a. growth over the last three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 32% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Charlotte's Web Holdings.

The Bottom Line

Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Charlotte's Web Holdings' future valuation. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Charlotte's Web Holdings after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Charlotte's Web Holdings analysts - going out to 2022, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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