Stock Analysis

Some Charlotte's Web Holdings, Inc. (TSE:CWEB) Analysts Just Made A Major Cut To Next Year's Estimates

  •  Updated
TSX:CWEB
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Market forces rained on the parade of Charlotte's Web Holdings, Inc. (TSE:CWEB) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.

Following the latest downgrade, the current consensus, from the six analysts covering Charlotte's Web Holdings, is for revenues of US$82m in 2022, which would reflect a discernible 5.5% reduction in Charlotte's Web Holdings' sales over the past 12 months. Losses are predicted to fall substantially, shrinking 81% to US$0.18. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$96m and losses of US$0.15 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

Check out our latest analysis for Charlotte's Web Holdings

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TSX:CWEB Earnings and Revenue Growth August 11th 2022

Analysts lifted their price target 35% to US$1.55, implicitly signalling that lower earnings per share are not expected to have a longer-term impact on the stock's value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Charlotte's Web Holdings at US$2.00 per share, while the most bearish prices it at US$0.70. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 11% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 0.9% over the last three years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 23% per year. It's pretty clear that Charlotte's Web Holdings' revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Charlotte's Web Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Charlotte's Web Holdings' revenues are expected to grow slower than the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Charlotte's Web Holdings going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

Valuation is complex, but we're helping make it simple.

Find out whether Charlotte's Web Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About TSX:CWEB

Charlotte's Web Holdings

Charlotte's Web Holdings, Inc. engages in farming, manufacturing, marketing, and selling hemp-derived cannabidiol (CBD) wellness products.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth5
Past Performance0
Financial Health5
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet with high growth potential.