As you might know, Charlotte's Web Holdings, Inc. (TSE:CWEB) last week released its latest yearly, and things did not turn out so great for shareholders. Revenues fell 3.9% short of expectations, at US$95m. Earnings correspondingly dipped, with Charlotte's Web Holdings reporting a statutory loss of US$0.16 per share, whereas the analysts had previously modelled a profit in this period. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Charlotte's Web Holdings after the latest results.
After the latest results, the seven analysts covering Charlotte's Web Holdings are now predicting revenues of US$109.0m in 2020. If met, this would reflect a decent 15% improvement in sales compared to the last 12 months. Statutory losses are forecast to balloon 32% to US$0.11 per share. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$140.9m and earnings per share (EPS) of US$0.094 in 2020. There looks to have been a major change in sentiment regarding Charlotte's Web Holdings's prospects following the latest results, with a pretty serious reduction to revenues and the analysts now forecasting a loss instead of a profit.
The average price target fell 36% to US$6.23, implicitly signalling that lower earnings per share are a leading indicator for Charlotte's Web Holdings's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Charlotte's Web Holdings analyst has a price target of US$9.80 per share, while the most pessimistic values it at US$3.45. With such a wide range in price targets, analysts are almost certainly betting on widely divergent outcomes in the underlying business. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Charlotte's Web Holdings's revenue growth is expected to slow, with forecast 15% increase next year well below the historical 45%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 39% per year. Factoring in the forecast slowdown in growth, it seems obvious that Charlotte's Web Holdings is also expected to grow slower than other industry participants.
The Bottom Line
The most important thing to take away is that the analysts are expecting Charlotte's Web Holdings to become unprofitable next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Charlotte's Web Holdings's future valuation.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Charlotte's Web Holdings going out to 2023, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for Charlotte's Web Holdings that you should be aware of.
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