Yahoo Finance Time To Worry? Analysts Just Downgraded Their Charlotte's Web Holdings, Inc. (TSE:CWEB) Outlook
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. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
After this downgrade, Charlotte's Web Holdings' seven analysts are now forecasting revenues of US$104m in 2021. This would be a reasonable 4.7% improvement in sales compared to the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 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 consensus price target fell 11% to US$4.97, with the analysts clearly concerned about the weaker revenue outlook and expectation of ongoing losses. 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. There are some variant perceptions on Charlotte's Web Holdings, with the most bullish analyst valuing it at US$8.03 and the most bearish at US$5.18 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. 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. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 32% annually. 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
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. Given the stark change in sentiment, we'd understand if investors became more cautious on Charlotte's Web Holdings after today.
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 2022, and you can see them free on our platform here.
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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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