Stronger Than Ever? Cannabis Companies Quietly Build Back Better Fundamentals

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Wednesday, May 14, 2025

We’re a long way from the cannabis stock boom of 2018, when Canada’s legalization of the drug sent pot stocks soaring. Today, while many of those companies remain, they’re valued at just a fraction of their former highs. However, in many cases, these companies are now fundamentally stronger, prompting savvy investors to reconsider whether the sector deserves a fresh look after several challenging years.

One such company trading at pennies on the dollar from those 2018 highs is Charlotte's Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF). The company is in the news today reporting their first year-over-year revenue increase in over three years, marking a significant milestone as the company continues to build on their quarterly growth trend established in 2024. 

For the quarter ended March 31, 2025, consolidated net revenue rose 1.1% to $12.3 million from $12.1 million in the same quarter last year. This growth was largely driven by the company's upgraded e-commerce platform, launched in mid-2024, which has led to stronger marketing performance, enhanced customer engagement, and increased sales. Charlotte's Web also continues to outperform retail category benchmarks, aided by recent product innovations and effective retail partnerships.

Despite a decline in gross profit to $6.2 million (50.8% of revenue) from $6.9 million (57.0%) in Q1 2024—largely due to favorable one-time factors in the prior year—the company expects margins to stabilize in the low 50% range. This outlook is supported by the transition to in-house production, starting with gummies and expanding to topicals. Additionally, total SG&A expenses were significantly reduced by 24.2% to $11.6 million, reflecting the company’s ongoing focus on expense control as a key strategy in 2025.

"Following three sequential quarters of improvement in 2024, Q1 delivered our first year-over-year revenue growth since 2021 – validating the transformation we initiated 18 months ago," said Bill Morachnick, Chief Executive Officer. "Our upgraded e-commerce platform is converting more visitors, and new digital storefronts on Amazon, TikTok Shop, and Faire are widening our reach. An upcoming nationwide rollout with Whole Foods Market will strengthen our retail footprint. Operationally, we commenced initial in–house gummy production and, as part of our disciplined cost agenda, we mutually concluded our promotional rights agreement with MLB and associated costs. Coupled with robust innovation – including cannabinoid isolates and our new functional mushroom gummy line – we believe these initiatives position the Company to deliver top and bottom-line growth for 2025 and beyond."

Shares of CWEB were trading 12% higher at $0.14, while their U.S. symbol (CWBHF) was slightly down on the day at $0.0948 in late-morning trading.

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