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
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
Admittedly, competitors continue to enter the market. During the summer, Canopy Growth
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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