Smarter Analyst

A Growing Medical Cannabis Stock That Flies Under the Radar

I am an ardent adherent to the benefits of cannabis, specifically CBD, the compound in cannabis that provides the health benefits that are sought after. Charlottes Web Holdings (CWBHF) is a perfect example of the reason I am behind cannabis like I am.  This company has produced a strain of cannabis that has significant health benefits for many ailments, most of which we are just beginning to learn about.  But, for a little girl named Charlotte, who suffered from a rare and acute form of epilepsy, this product may have saved her life.  It should be noted that there are some 3 million people in the United States that suffer from some form of epilepsy and may be a potential customer of this product, or some form of it.

Charlottes Web Holdings came public just last November in very quiet fashion.  And, the company has progressively become profitable.  While the current revenue does not justify the current valuation of the company, it is my belief that future revenues will increase significantly over the course of many years.

For now, here is the most recent stock price since its IPO in November (Notice that this is a 2-hour bar chart; the company’s history is that short):

In their latest quarter, Charlottes Web Holdings reported revenue of $23.1 million with profits of $2.3 million, 10% net margins.  This is expected to grow further as the company’s products become more and more available around the nation.  Their current market capitalization is $1.3  billion.  However, given the current revenue and profits, with a 20-times multiple the company would be worth about $45 million, just 15% of its actual market capitalization.  However, there is plenty of potential with the company.

In case you were not familiar with cannabis as a medical property, it is important to note understand the main components of cannabis.  First, there are over 400 total components to the cannabis plant.  Of those, there are approximately 62 main components.  Of those, there are two components that are highly sought after: THC and CBD.  The former is the psycho-active that gets people high.  The later is cannabidiol, the component that has the health benefits.  It is possible to grow plants that are strictly producing CBD without THC (or, less than 0.10% of THC).

The 2019 Farm Bill is where a lot of future lays with the future of cannabis and specifically hemp and CBD.  Now that the Farm Bill has legalized hemp and CBD; albeit in a highly regulated format, the ability to study these products exists; universities and laboratories will embrace this opportunity.  And, given the proliferation of cannabis in the country, CBD-derived products are going to become more mainstream as America embraces this as an alternative to pharmaceuticals.

Charlottes Web Holdings already has adherents and their revenue is very likely to continue to grow as more and more markets open up.  Also, because of the Farm Bill, Charlottes Web Holdings products are very likely to be embraced.

There was a time in our nation’s history when cannabis based drugs were 65% of the entire market.  That is how important cannabis used to be.  That was also prior to prohibition.  Since then, pharmaceutical companies have proliferated and dominated the market.  Now, that tide is changing.  Charlottes Web Holdings is on the forefront of this movement.  I expect continued profits from this company as their products continue to reach new markets in the country and around the world.

Check out the articles in this category focused on cannabis stocks. By gaining a strong foundation in both the fundamentals and technical details usually involved in cannabis stocks, you’ll be able to invest with greater confidence.

 

Author’s Disclosure:  I have no positions on Charlottes Web Holdings nor am I intending on initiating a position in the near-term future.