There are few investment themes that have so much going for them as the CBD theme does right now. Some contend that the CBD boom already ran its course in terms of investible securities (mostly equity in small-cap stocks). But the data argue otherwise. As we see it, the real boom has yet to start, and it could be a defining opportunity that lies ahead.
The reason for this contrarian optimism is the recent acceleration of growth seen in research analysis for the space into year-end and in coming years. The big point is that the CBD boom is one defined by the pace of mainstream consumer adoption. How fast people take notice of CBD and integrate it into their normal consumer behavior. By such a process, the overall industry is seen moving from $500M to $25B in just a few years.
That’s as clean and clear as it gets when it comes to investible booms. Today, we look at three stocks that represent unique opportunities in the thick of this transition toward a potential new leg higher for the CBD theme: Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF), International Spirits & Wellness Holdings Inc. (OTC:ISWH), and Canopy Growth Corp (NYSE:CGC).
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) is perhaps made extra special by recent commentary from Stansberry’s Tom Carroll: “It’s the leader in CBD products, with a five-year lead on everyone else. It has strong brand recognition and great intellectual property on its seeds and strains. And it has far less regulatory uncertainty than most other companies. I think this is a ‘must own’ in the sector.”
We have been positive on the stock given the growth trend for CBD and the fact that CWBHF is really the only viable and significant pure play in the space.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) develops and distributes hemp-based cannabidiol (CBD) wellness products. Its products include CBD hemp oils, capsules, topicals, and pet products that feature CBD hemp oil extracts.
Charlotte’s Web Holdings, Inc. sells its products online as well as through distributors, and brick and mortar retailers.
The company was formerly known as Stanley Brothers Holdings Inc. and changed its name to Charlotte’s Web Holdings, Inc. in July 2018. The company was incorporated in 2018 and is headquartered in Boulder, Colorado.
Charlotte’s Web Holdings, Inc. is the market leader in the production and distribution of innovative hemp-based cannabidiol wellness products. Founded by the Stanley Brothers, the Company’s premium quality products start with proprietary hemp genetics that are responsibly manufactured into whole-plant hemp extracts naturally containing a full spectrum of phytocannabinoids, including CBD, terpenes, flavonoids and other beneficial hemp compounds. Industrial hemp products are non-intoxicating.
Charlotte’s Web current product categories include tinctures (liquid products), capsules, topical, as well as pet products. Charlotte’s Web hemp-based whole plant extracts are sold through select distributors, brick and mortar retailers, and online through the Company’s website.
With CBD forecasts boiling over as US mainstream consumer adoption accelerates, the stock is set to potentially benefit if the company is able to effectively take advantage.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) pulled in sales of $33.5M in its last reported quarterly financials, representing top line growth of 50.6%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($67.2M against $18.3M).
International Spirits & Wellness Holdings Inc. (OTC:ISWH) has pivoted over the past 18 months, and is growing up rapidly in its new reinvented life. This story started as a company exclusively dedicated to high-end adult beverage production. The legacy of that identity is still in place with its Spirits segment in the form of its award-winning Mexican-distilled high-end tequila brand (Besado Tequila).
But the big strategic shift for ISWH got traction at the end of Q3 2018 when the company’s management and board decided to begin investing in a Health and Wellness segment to include branded CBD products and home healthcare services.
At this point, ISWH’s Home Health Care segment is in a boom, demonstrating tangible financial performance in the space, leading to EBITDA profitability and 6,400% sales growth. That defines the company’s Q2 and Q3 of 2019. But Q4 is likely going to be defined by the company’s resumption of high volume sales of its P19 branded nano-infused CBD-based wellness products.
As noted in its most recent press release, after a period of reconfiguring its CBD supply chain and strategic relationship with BioPulse Labs, ISWH just announced that sales of its line of branded P19 CBD-Based Wellness products is resuming. This could put an enormous charge into the stock as investors start to look forward to a new narrative defined by profitability and strong growth heading into the final quarter of the year.
“Growth estimates for the overall CBD market are in the process of being revised sharply higher as mainstream consumer adoption dramatically outperforms prior baseline expectations for 2019,” commented Terry Williams, ISWH CEO. “It’s a perfect time for our diverse array of hemp-derived CBD products to resume live sales and distribution. This is a principle reason we have had to mark up our financial expectations heading into Q4.”
According to the company, ISWH is eager to restart sales given recent upward adjustments to forecasts for growth in CBD demand over coming quarters. Brightfield Group, a leading market and consumer intelligence firm for the legal CBD and cannabis industries, recently increased its own growth forecast for the CBD market, published analysis calling for a 706% year-over-year CBD product sales jump in the US in 2019 to around $5 billion in total sales, with sales expected to reach $23.7 billion by 2023.
This is a sub-penny, which is normally not consistent with exceptional potential. But there are obvious exceptions to that idea. And this may be one of them. Just clear away the sense of the stock’s price per share, and you have a company that is growing its top-line fast and just turned profitable on an EBITDA basis, and now it is firing up arguably its biggest growth driver for the move into year-end.
Give it a serious look.
Canopy Growth Corp (NYSE:CGC) has U.S. operations related to hemp and cannabidiol, or CBD, in seven states and when at full capacity will cover more than 4,000 acres. In a recent release, Canopy Growth said that was the equivalent of 11,072 hockey rinks or nearly American 3,268 football fields.
The company said that it was currently planting a mix of high-CBD hemp plants and industrialized hemp suitable for textiles, proteins and bioplastics. The update on its CBD operations arrived after the company announced that the landmark deal to acquire the right to buy U.S.-based weed producer Acreage Holdings Inc.
Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.
According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.
In the company’s words, “Canopy Growth is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time.”
This is also one of the most geographically diversified players in the cannabis space, with operations in 12 countries across five continents.
And there has been plenty of PR work here. The Company is proudly dedicated to educating healthcare practitioners, conducting robust clinical research, and furthering the public’s understanding of cannabis, and through its partly owned subsidiary, Canopy Health Innovations, has devoted millions of dollars toward cutting edge, commercializable research and IP development. Through partly owned subsidiary Canopy Rivers Corporation, the Company is providing resources and investment to new market entrants and building a portfolio of stable investments in the sector.
One of its most important divestitures and strategic interests is Canopy Rivers Inc., a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. The company works collaboratively with Canopy Growth to identify strategic counterparties seeking financial and/or operating support.
The company has developed an investment ecosystem of complementary cannabis operating companies that represent various segments of the value chain across the emerging cannabis sector. As the portfolio continues to develop, constituents will be provided with opportunities to work with Canopy Growth and collaborate among themselves, which the company believes will maximize value for its shareholders and foster an environment of innovation, synergy and value creation for the entire ecosystem.
In any case, the CGC CBD move has begun.
Canopy Growth Corp (NYSE:CGC) managed to rope in revenues totaling $90.5M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 249.1%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.2B against $372.8M).