Charlotte’s Web Stock Forecast: Cannabidiol (CBD) products have been in the media for the past few years. They are derived from cannabis, but they do not produce intoxication. Instead, CBD products are associated with beauty, health, and wellness – and the market is huge.
CBD went from practically nonexistent to becoming a household name with billions in sales over relatively few years. In 2018, the industry was valued at $1.9 billion. In July 2020, Business News Daily said that the industry will hit $20 billion by 2024. That is a rate of growth equal to 49% per annum.
Many investors are looking forward to anteing up while the industry is growing, and CBD companies are still expanding. Charlotte’s Web [CWBHF] is one option.
Charlotte’s Web = CBD Wellness Products
Charlotte’s Web makes and sells CBD wellness products. This includes ingestible products such as tinctures and gummies as well as topical CBD products and items for pets. Some of its product lines include Charlotte’s Web, Harmony Hemp, CBD Medic, and CBD Clinic.
Roughly half of these items are sold through the Charlotte’s Web e-commerce website while distributors and retailers account for the rest.
However, this product portfolio is just the beginning. The company intends to expand its offerings as the US Food and Drug Administration (FDA) approves new product categories.
This may include food and beverages as well as supplements and products for dedicated health care practitioners to use in the course of their services.
Is Charlotte’s Web Stock A Buy?
Charlotte’s Web began its journey as Stanley Bros in 2011, developing hemp. In 2013, Dr. Sanjay Gupta, CNN’s Chief Medical Correspondent spoke of the benefits of cannabinoids and Charlotte’s Web in particular.
Today, the company is the number one CBD wellness product company by market share (it has 33% of the total market) and has 21,000 retail locations, including seven national retail chains.
Charlotte’s Web is also entirely vertically-integrated – from “seed to self.” The company grows non-GMO hemp 100% in the United States then makes it into health and wellness products in its own factories that are both FDA-registered and verified as Good Manufacturing Practices.
The company has a 40,000 square-foot manufacturing and research facility and it just completed work on a 137,000 sqft expansion facility.
In addition to an enviable market position, Charlotte’s Web has other advantages going for it. The company has an experienced management team in place and scalable platforms for the cultivation of hemp as well as the production of CBD products.
Charlotte’s Web is actively pursuing innovation and setting itself up for future success as legislation surrounding CBD products changes. To help secure its standing, the company recently acquired Abacus (finalized January 2020).
Risks of Investing in Charlotte’s Web
First, you need to understand that by investing in Charlotte’s Web, you are investing in CBD. CBD products were removed from the Controlled Substances Act and placed under the purview of the FDA through the 2018 Farm Bill, but that wasn’t the end of it.
The way the FDA is treating CBD is still evolving. At this time, the FDA is cracking down on companies that market CBD products using unproven medical claims. Even those that do show efficacy still need to prove that the benefits of using CBD outweigh the risks of using cannabidiol products.
Much is still not known about the overall safety of CBD, especially as it pertains to cumulative exposure, special populations, and animals. Depending on how the FDA decides to treat CBD, Charlotte’s Web could experience some risk to its operations.
Charlotte’s Web is working to manage some of these risks. One effort is to obtain Generally Recognized as Safe (GRAS) status for its full spectrum hemp extract.
The company has also worked to get its edible pet products approved by the National Animal Supplement Council to carry a Quality Seal that confirms its quality standards. Charlotte’s Web has worked for other seals and certifications as well, including the U.S. Hemp Authority Certified Seal.
There is also the issue of COVID. As the pandemic took hold, unemployment surged, and consumer discretionary spending was affected.
The full extent of the impact of the COVID crisis has not yet been realized, but Charlotte’s Web has identified it as a risk. If fewer people are working, there will be less money for them to spend on personal items.
Will Charlotte’s Web Competitors Beat It?
Competition in the CBD industry is fierce. The industry is growing exponentially. The market is fragmented but competition is very real and coming from many directions. Some of the companies lining up to get a piece of the pie are well-established, large corporations while others are small independent providers.
Charlotte’s Web is in a good position to capitalize on these trends – remember, it is number one by market share – but it will need to work hard to maintain its spot as king of the hill. Product innovation is one aspect, but Charlotte’s Web will also need to grow its e-commerce position, attract new distributors, and identify partnership (and acquisition) opportunities to keep growing.
Charlotte’s Web Stock Forecast: The Bottom Line
Investing in a company that produces and sells cannabidiol products is one way to take advantage of the CBD trend. However, the challenge is picking the right stock for your investment.
Charlotte’s Web is a good contender because it already has such strong market share, but the CBD industry is in flux. Until the FDA finalizes its position on cannabidiol and related products, any company could emerge as the leader.
All it takes is an FDA ruling that benefits one organization over another and the share price of a company could explode or plummet.
Before investing in a company like Charlotte’s Web, investors need to stay on top of the CBD industry and the way that sector evolves with regard to legislation or regulation.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.