Charlotte’s Web focuses solely on cannabidiol products such as topical creams, nutritional supplements, and bath, pet, and beauty products, all of which are intended for wellness rather than recreational purposes.
In the first quarter, 69.9% of its revenue came from its direct-to-consumer operations, which are growing slightly faster than its business-to-business traffic.
But management hasn’t outlined a clear plan for how the funds from a new stock offering would be used to accelerate the company toward profitability or more rapid growth, so it’s hard to have confidence in its future.
Given that its 2020 operating expenses were only CA$47.4 million, it can keep operating at a loss for a long time before it will need to raise more cash.
The drop is consistent with the downward trend in its quarterly revenue since 2019, which has been occurring in the context of rapidly rising sales of cannabis in Canada.
Happily for investors, the company’s new initiative in investment banking for cannabis companies is already bearing more fruit than its cannabis-selling operations.
So, if Sundial can make the transition from being primarily a cannabis seller to being more of a cannabis banker, its existing problems with the unprofitability of its cultivation facilities could be smoothed over.
In my view, Sundial Growers is a better cannabis stock because its financial situation is significantly better than that of Charlotte’s Web, as is its plan to grow its business.
Of course, Sundial hasn’t consistently delivered for its shareholders either.