CV Sciences Stock Hammered Following Earnings

CV Sciences  fell in Wednesday trading as the company missed on both earnings and revenue. The San Diego-based CBD company lost about 25% of its value during Wednesday’s trading session following the news.

As a company that has missed estimates in three of the last four quarters, investors appear concerned. However, CV Sciences remains the second-largest hemp CBD company in the U.S., lagging only Charlotte’s Web Holdings . With a strong market position and massive overall growth in the industry, investors can make a strong case for buying this dip.

CV Sciences Missed On Earnings, Revenue

For its third quarter, the company reported a loss of one cent per share. This fell short of Wall Street expectations by two cents per share as analysts had predicted a profit of one cent per share. The company earned three cents per share in the year-ago quarter.

Revenue also came up short as the company reported bringing in $12.6 million. This fell short of estimates by $6.01 million and represented a 7.4% drop on a year-over-year basis.

The company blamed lower revenues on an uncertain regulatory environment for CBD as well as rising competition. For the drop in profits, they blamed reduced sales as well as increased investments in sales, marketing, and R&D.

This led to a massive selloff. CVSI stock had closed at $2.10 per share before the report. However, in Wednesday trading, CV Sciences fell as low as $1.25 per share before staging a partial recovery. CVSI stock rose as high as $1.71 per share before pulling back in the afternoon. It closed the Wednesday trading session at $1.58 per share.

CVSI Grows Its Footprint Amid Competition

Given the strides CVSI stock made in recent months, the results appear baffling. During the quarter, the company’s store count rose from 4,591 to 5,435. These stores also include retailers such as Kroger , CVS Health , and The Vitamin Shoppe .

Admittedly, competitors continue to enter the market. During the summer, Canopy Growth broke ground on a hemp industrial park in upstate New York. However, analysts expect the compound annual growth rate for the CBD market to reach 125.58% between 2019 and 2026. This growth rate should help to ensure growth, particularly to larger players such as CV Sciences.

Should I Buy CVSI Stock?

Despite the disappointing quarterly report, CV Sciences retains a strong market position. Granted, it would have helped to have some guidance for 2020. However, full-year guidance for the full year points to revenue between $55 million and $57 million. That still represents a substantial increase from $48 million in 2018.

Moreover, unlike most cannabis companies, CVSI stock has a history of making profits. Consensus estimates point to a loss of five cents per share for 2019. However, they believe profits will return in 2020 as Wall Street forecasts earnings of nine cents per share. This would take the forward price-to-earnings (P/E) ratio to just 17.8. In a world where many marijuana stocks trade at a higher price-to-sales (P/S) ratio, this seems like a bargain. The P/S ratio for CVSI stock stands at 2.7.

Hence, CVSI stock looks like a buy at these levels. Given the quick recovery from session lows, traders may have decided that they agree.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Will Healy
Will Healy is a freelance business and financial writer based in the Dallas area. In addition to marijuana, energy, and mining stocks, he has also written about real estate, insurance, personal finance, and macroeconomics. In addition to Capital 10X, his articles have appeared on sites such as InvestorPlace, Yahoo! Finance, MSN Money, Kiplinger’s Personal Finance, GOBankingRates, and Seeking Alpha. Will holds a B.S. in Journalism from Texas A&M University, an M.S. in Geography from the University of North Texas, and an MBA from the University of Texas at Dallas. Phone: 416-721-8257. Address: 682 Indian Road Toronto, Ontario M6P 2C9.
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