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4 Stocks Giving Investors Direct Exposure to CBD

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OTC: MJNA

Medical Marijuana, Inc.

With global CBD sales potentially hitting $22 billion by 2022, here are four CBD stocks you’ll want to know about.

Few if any industries have been as unstoppable of late as legal marijuana. Since the beginning of 2016, most pot stocks have seen their valuations rise by a triple-digit or quadruple-digit percentage, with global growth estimates for the industry soaring following the legalization of adult-use weed in Canada and multiple medical cannabis legalizations in countries around the globe.

How big could the marijuana industry become? That’s really a matter of interpretation, with a variety of Wall Street investment firms projecting anywhere from $50 billion to $75 billion in sales by the end of the next decade, and the duo of Arcview Market Research and BDS Analytics calling for a compound annual growth rate of nearly 27% between 2019 and 2022.

Image source: Getty Images.

CBD offers a compound annual growth rate of 147% through 2022

However, there’s an even hotter industry that’s budding from within the marijuana movement: cannabidiol (CBD). CBD is the nonpsychoactive cannabinoid best known for its perceived medical benefits, and since it won’t get a user high, it’s become an intriguing means of luring in new consumers who’ve never tried a cannabis-related product before.

According to a report from the Brightfield Group, worldwide CBD sales are expected to soar from $591 million in 2018 to as high as $22 billion by 2022, which works out to a compound annual growth rate of 147%, for those of you keeping score at home.

CBD itself can be extracted from two sources: the cannabis plant and the hemp plant. Generally speaking, hemp is a CBD-rich plant with minimal tetrahydrocannabinol (THC) content. THC is the cannabinoid that gets a user high. Meanwhile, CBD content in cannabis plants can be hit or miss, depending on the strain. CBD derived from hemp plants is legal in all 50 states following the December passage of the Farm Bill, whereas CBD derived from the cannabis plant is still considered illicit at the federal level. However, adding CBD of any form to food, beverages, or dietary supplements is a no-no since it still falls under the guidance of the U.S. Food and Drug Administration (FDA).

Four direct players in the CBD space

With this in mind, here are a handful of stocks that’ll provide investors with direct exposure to the burgeoning CBD market.

Image source: Getty Images.

Charlotte’s Web Holdings

Arguably no company is more attractive from a growth perspective relative to CBD than Charlotte’s Web Holdings (CWBHF -0.60% ) . Charlotte’s Web has the highest retail market share for CBD products in the United States, with access to 3,680 retail stores at the end of 2018.

This is a company that focuses entirely on hemp-extracted CBD, meaning that in one fell swoop, via a signature from Donald Trump on Dec. 20, 2018, all of its products became legal in 50 states, with some kinks to be worked out in the near future regarding CBD as a food and beverage additive. In other words, the Farm Bill’s passage rolled out the green carpet for Charlotte’s Web to get its products into new retail locations. Just about the only thing missing at this point is a brand-name retail partnership.

What isn’t missing are profits. Charlotte’s Web has been profitable on an operating basis for approximately two years, with the company generating $69.5 million in sales in 2018, representing 74% organic sales growth. For 2019 and 2020, Wall Street is looking for a successive more-than-doubling in aggregate sales to $152 million and $313 million, respectively. Again, with Charlotte’s Web already profitable, and CBD products typically yielding much higher margins than traditional dried cannabis flower, this company looks to be in excellent shape.

Image source: Getty Images.

CV Sciences

Another CBD stock that finds itself on the right side of the profit column is CV Sciences (CVSI -8.33% ) .

Like Charlotte’s Web, CV Sciences retails a variety of hemp-derived CBD products in retail stores. According to its full-year results reported about a month ago, the company’s PlusCBD brand of hemp products was available in 2,238 stores at the end of the year, which represents a 45% increase from the end of 2017. However, the passage of the Farm Bill has already opened up new distribution avenues for the company, which means its retail door count should expand significantly in the quarters that lie ahead.

For the year, CV Sciences tallied $48.2 million in sales, up 133% from the prior-year period, while recording net income of $10 million. The lone estimate from Wall Street is forecasting 68% sales growth in 2019 and an additional 47% in 2020, with revenue hitting $119 million by the turn of the decade.

It is worth noting, though, that CV Sciences is facing possible legal pushback from a drug it’s developing that combines CBD and nicotine as a smokeless tobacco-cessation solution. Short-seller Citron Research, which often has short positions in the stocks it bashes (i.e., a financial interest), released a report in August 2018 showing that CV Sciences’ combo drug patent application had been rejected by the U.S. Patent and Trademark Office. Citron alleges this was never disclosed to investors, which has been grounds for lawsuits. It’s something to keep in mind if you’re considering CV Sciences as a possible investment.

Image source: Getty Images.

Medical Marijuana, Inc.

Even though it’s a tiny tot, another means of gaining direct CBD exposure is by considering penny stock Medical Marijuana, Inc. (MJNA 0.67% ) . Of course, don’t let the company’s $0.066 share price trick you — it has so many shares outstanding that it’s pretty much a bona-fide small-cap with a $238 million market cap.

As the name implies, Medical Marijuana, Inc. supplies hemp-derived products to the U.S., Mexico, and other international markets. This week, Medical Marijuana announced that it had secured about 100 new retail locations during the first quarter, outpacing internal expectations. Like Charlotte’s Web and CV Sciences, the passage of the Farm Bill looks to have played a big role, with CBD acceptance growing and nontraditional retailers willing to carry select CBD products.

Like its peers, Medical Marijuana has seen its top line moving in the right direction. Third-quarter revenue, reported back in November, was slightly over $16.8 million, representing a 116% year-over-year increase. Unfortunately, it hasn’t been profitable on a recurring basis, but it appears to be working toward that mark. In the third quarter, the company generated an operating profit, after expenses, of $0.6 million.

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Keep in mind, though, that revaluations of the company’s investment portfolio can wreak havoc on Medical Marijuana, Inc.’s bottom line, and it has resulted in aggregate losses of $158 million through the first nine months of 2018.

Image source: Getty Images.

GW Pharmaceuticals

Lastly, investors can gain direct CBD exposure with the only marijuana stock to have gained FDA approval for a cannabis-derived drug: GW Pharmaceuticals (GWPH) .

In June, the FDA approved GW Pharmaceuticals’ lead CBD-based oral drug known as Epidiolex as a treatment for two rare forms of childhood-onset epilepsy. In multiple late-stage trials, Epidiolex wound up reducing seizure frequency from baseline by between 30% and 40%, which handily topped the effectiveness of the placebo over the defined treatment range. Epidiolex is currently the only drug approved by the FDA to treat Dravet syndrome, and its only potential competitor, Zogenix, had its new drug application for fintepla refused for the time being, giving GW Pharmaceuticals a clear runway to grow sales.

How big could Epidiolex become? That’s up for interpretation, but most Wall Street companies foresee $500 million to perhaps even north of $1 billion in peak annual sales. In the company’s most recent quarter, we learned that GW Pharmaceuticals sold $4.7 million worth of Epidiolex in its first two months on pharmacy shelves. While it’s had little trouble securing insurer coverage for its seizure therapy that costs roughly $32,500 a year, GW Pharmaceuticals is also going to need more than $4.7 million in quarterly sales to maintain a $5-plus billion valuation moving forward.

Top Marijuana Stocks for June 2022

HYFM, OGI, and IIPR are top for value, growth, and performance, respectively

Nathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016.

The marijuana industry is made up of companies that either support or are engaged in the research, development, distribution, and sale of medical and recreational marijuana. Cannabis has begun to gain wider acceptance and has been legalized in a growing number of nations, states, and other jurisdictions for recreational, medicinal, and other uses. Some of the biggest companies in the marijuana industry include Canopy Growth Corp., Cronos Group Inc., and Tilray Inc. Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth.

Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have dramatically underperformed the broader market. MJ has provided a total return of -63.5% over the past 12 months, well below the Russell 1000’s total return of -4.2%. These market performance numbers and all statistics in the tables below are as of May 27, 2022.

Below we look at the top five marijuana stocks with the best value, fastest growth, and best performance.

Best Value Marijuana Stocks

These are the marijuana stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in the early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business’s value. A business with higher sales could eventually produce more profit when it achieves (or returns to) profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.

Best Value Marijuana Stocks
Price ($) Market Cap ($B) 12-Month Trailing P/S Ratio
Hydrofarm Holdings Group Inc. (HYFM) 6.73 0.3 0.6
GrowGeneration Corp. (GRWG) 5.06 0.3 0.7
Ayr Wellness Inc. (AYR.A.CX) CA$8.21 CA$0.5 1.1
Cresco Labs Inc. (CL.CX) CA$4.87 CA$1.4 1.3
Jushi Holdings Inc. (JUSH.CX) CA$2.41 CA$0.4 1.7
  • Hydrofarm Holdings Group Inc.: Hydrofarm Holdings Group is a holding company that, through its subsidiaries, makes and distributes hydroponic products to customers throughout the U.S., Canada, and Europe. The company offers hundreds of brands. It has a total of nine distribution centers, offering a product line of more than 5,000 items.
  • GrowGeneration Corp.: GrowGeneration is a distributor of agricultural products and one of the largest hydroponics suppliers in the country, operating retail hydroponic and organic specialty gardening retail outlets. Though GrowGeneration is not a pure-play cannabis company, many of its products are used in cannabis cultivation. It sells thousands of products, including plant nutrients, farming soils, advanced lighting technology, and hydroponic and aquaponic equipment. It owns and operates 63 retail and distribution centers. On May 10 the company reported results for Q1 2022, including net loss of $5.2 million compared with net income for the prior-year quarter. Net sales fell by 9.2% YOY, driven by softer demand.
  • Ayr Wellness Inc.: Ayr Wellness is a cannabis company involved in the cultivation, manufacturing, and dispensing of cannabis and cannabis-derived products. The company’s product portfolio includes flowers, seltzers and tinctures, edibles and vape products under brands including Kynd, Origyn, Stix Preroll Co., Levia, Road Tripper, Entourage, Haze, Wicked, Secret Orchard, and Cannapunch. Ayr Wellness also trades over the counter (OTC) in the U.S. under the ticker AYRWF. On May 25, Ayr Wellness completed the acquisition of Herbal Remedies Dispensaries LLC, an operator of two licensed retail dispensaries in Quincy, Illinois. Ayr Wellness paid a total of $30 million for Herbal Remedies, including stock, notes and cash.
  • Cresco Labs Inc.: Cresco Labs grows, manufactures, distributes, and packages cannabis products. The company operates in 10 states, including production facilities and dispensaries. Its brands include Cresco, Reserve, Remedi, High Supply, Wonder Wellness Co., Mindy’s, Good News, Sunnyside, and FloraCal Farms. Cresco Labs’ stock also trades OTC in the U.S. under the ticker CRLBF.
  • Jushi Holdings Inc.: Jushi Holdings is a holding company focused on branded cannabis and hemp-based assets. The company is engaged in retail, distribution, cultivation, and processing operations. Its brands include: The Bank, focused on plant genetics and cultivation; The Lab, specializing in vape products and concentrates; Nira, a maker of hemp-based CBD products that are physician formulated; Nira+, a producer of medicinal THC products; Sèche, which offers various branded ground and flower cannabis products; and Tasteology, a provider of THC-infused products. Jushi also trades OTC in the U.S. under the ticker JUSHF. On May 16, Jushi announced the launch of solventless cannabis rosin extracts by its brand, The Lab. The company said that demand for rosin cartridges and concentrates is rising.

Fastest Growing Marijuana Stocks

These are the marijuana stocks with the highest year-over-year (YOY) sales growth for the most recent quarter. Rising sales can help investors identify companies that are able to grow revenue organically or through other means, and find growing companies that have not yet reached profitability. In addition, earnings per share can be significantly influenced by accounting factors that may not reflect the overall strength of the business. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.

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Fastest Growing Marijuana Stocks
Price ($) Market Cap ($B) Revenue Growth (%)
OrganiGram Holdings Inc. (OGI) 1.21 0.4 118.0
Cronos Group Inc.: (CRON) 3.10 1.2 98.5
Ayr Wellness Inc. (AYR.A.CX) CA$8.21 CA$0.5 90.4
Sundial Growers Inc. (SNDL) 0.40 0.9 77.9
Verano Holdings Corp. (VRNO.CX) CA$9.15 CA$2.8 67.4
  • OrganiGram Holdings Inc.: OrganiGram Holdings is a Canada-based producer of medical and recreational cannabis focused on producing high-quality, indoor-grown cannabis. It is the parent company of Organigram Inc., a producer of cannabis products, and The Edibles and Infusions Corp., a cannabis-infused, soft-chew and confectionary manufacturer. Its brands include The Edison Cannabis Co., monjour, Bag o’ Buds, SHRED, and Trailblazer. OrganiGram’s stock also trades in Canada on the TSX under the ticker OGI.TO.
  • Cronos Group Inc.: Cronos Group is a Canada-based vertically integrated cannabis company with distribution across five continents. It distributes medical marijuana and cultivates cannabis oil. Cronos Group’s portfolio includes a global wellness platform, adult-use brands, and multiple hemp-derived cannabidiol (CBD) brands. Cronos’ brands include Spinach, Lord Jones, Happy Dance, and PEACE+. On May 10, Cronos reported that net losses narrowed sharply as consolidated net revenue roughly doubled YOY. While U.S. net revenue declined YOY, increased market share in Israel and Canada helped to drive growth.
  • Ayr Wellness Inc.: See company description above.
  • Sundial Growers Inc.: Sundial Growers is a Canada-based diversified cannabis company engaged in the cultivation, manufacturing and processing, and retailing of various cannabis products. The company focuses on inhalables for the Canadian adult-use market. Its branded products are available in flower, vape, pre-roll, and other forms. The company’s brands include Sundial, Top Leaf, Palmetto, and Grasslands. Sundial reported Q1 2022 earnings on May 16. Net losses narrowed YOY as revenue surged. Strong growth in revenues from edibles and concentrates drove of overall performance.
  • Verano Holdings Corp.: Verano Holdings is a vertically integrated, multistate cannabis operator. The company produces a wide range of medical and adult-use cannabis products, which it sells through its portfolio of brands, including: Verano, Avexia, Encore, and MÜV. It owns and operates 15 cultivation facilities and 116 retail locations in a number of states throughout the U.S. (the number of cultivation facilities and retail locations includes those operated and owned by two pending acquisitions). The company’s stock also trades OTC in the U.S. under the ticker VRNOF. Verano announced on May 26 the opening of Zen Leaf Westover, its second dispensary in West Virginia and its 99th nationwide. West Virginia medical cannabis sales are projected to reach up to $49 million by 2026.

Marijuana Stocks with the Best Performance

Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market has as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still. These are the marijuana stocks that had the smallest declines in total return over the past 12 months out of the companies we looked at.

Marijuana Stocks with the Best Performance
Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Innovative Industrial Properties Inc. (IIPR) 130.01 3.6 -27.0
4Front Ventures Corp. (FFNT.CX) CA$0.94 CA$0.6 -43.0
Sundial Growers Inc. (SNDL) 0.40 0.9 -53.8
OrganiGram Holdings Inc. (OGI) 1.21 0.4 -57.1
Cronos Group Inc. (CRON.TO) CA$3.97 CA$1.5 -57.9
Russell 1000 N/A N/A -4.2
ETFMG Alternative Harvest ETF (MJ) N/A N/A -63.5
  • Innovative Industrial Properties Inc.: Innovative Industrial Properties (IIP) is a real estate investment trust (REIT) that engages in the acquisition, disposition, development, and management of industrial facilities leased to tenants in the regulated cannabis industry. The company’s portfolio consists of specialized industrial and greenhouse buildings leased to state-licensed cannabis operators across the U.S. On May 16, the company announced it had closed on its $40-million acquisition of 104,000 square feet of industrial space in Taunton, Mass. The space is a regulated cannabis cultivation, processing and dispensing operation. IIP also entered into a long-term lease agreement with a subsidiary of cannabis company TILT Holdings Inc.
  • 4Front Ventures Corp.: 4Front Ventures owns and operates cannabis cultivation and production facilities. It cultivates marijuana, produces cannabis flower, edibles, and oil-based products, and distributes its products via medical dispensaries or adult-use stores. The company owns and operates production and retail facilities across five U.S. states. It produces more than 32 tons of cannabis per year and owns over 20 brands offering more than 1,800 unique product lines. 4Front’s stock also trades OTC in the U.S. under the ticker FFNTF. In late April, the company completed its purchase of Island Global Holdings Inc., a maker of flower, concentrate , and pre-rolls products. The acquisition adds to 4Front’s brand portfolio and strengthens its position in the California market. Terms of the deal were not disclosed.
  • Sundial Growers Inc.: See company description above.
  • OrganiGram Holdings Inc.: See company description above.
  • Cronos Group Inc.: See company description above. Note that this listing is for Cronos Group shares listed in Canada.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Top Three CBD Stocks to Watch Closely in 2021

There’s a lot of overlap between CBD stocks and pot stocks. Which, of course, makes perfect sense. The cannabis plant has scores of active chemical compounds in it. One of them is delta-9-tetrahydrocannabinol (THC). This is the compound that gets stoners… stoned.

The other big one is cannabidiol (CBD). This compound has no psychoactive properties. But there are a whole lot of potential health benefits. Now, marijuana producers have no need to weed out the CBD. However, companies focusing on CBD do have to keep out the THC if they want to sell their products over the counter. But it’s not terribly difficult if the CBD is derived from industrial hemp – which, unlike marijuana, is not a controlled substance.

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To complicate matters even further, the Food & Drug Administration hasn’t compiled a whole lot of information on CBD. So it lingers in a state of near-limbo… due, if nothing else, to its close proximity to THC. It’s not quite legal. But based on how easy it is to find CBD products at the local pharmacy, grocery store and coffee shop, it’s obviously not illegal either. However, its legal status can depend on which state you live in.

Here’s how that works…

In 2018, President Trump signed the Agriculture Improvement Act. This is better known as the 2018 Farm Bill. In that act, there was a section that removed hemp from the Controlled Substances Act. Thanks to that bill, CBD – which can be extracted from hemp – was deemed legal on the federal level. The bill actually targeted the agricultural aspect, though. Compounds extracted from hemp – à la CBD – aren’t privy to the same complete green light as hemp itself. So CBD operates in a mixed jurisdictional realm.

Warning: More Politics & Science Ahead

The federal government won’t arrest folks for growing hemp anymore. Extracting CBD or possessing it isn’t a federal crime anymore either. Well, as long as there’s less than 0.3% THC content. But not all states see eye to eye with the feds. Some states still want to see more evidence of the benefits and lack of drawbacks. And in some states, CBD remains blacklisted.

But here’s a big feather in the cap of CBD. The Food & Drug Administration has approved a CBD product to treat Lennox-Gastaut syndrome. It’s also been approved to treat Dravet syndrome. To paraphrase, it’s been proven to help those suffering from certain types of epilepsy.

When Greenwich Biosciences received approval for its epilepsy drug, Epidiolex, it was initially considered a controlled substance… simply because it was derived from marijuana. But when the company requested it be removed from the controlled substances list, the Drug Enforcement Agency (DEA) agreed. This was a big deal because it was the first time the DEA removed any type of cannabis compound from Schedule 1. And this could eventually prove to be a tipping point.

Regardless of what the FDA says, studies have shown that CBD can help to treat insomnia and anxiety and even act as an antidepressant. It has also helped those dealing with chemotherapy and can treat acne. Nonetheless, not everyone remains sold on the prospect of CBD. And at least part of the problem is bad actors.

The FDA had to warn folks to stop claiming CBD could cure the coronavirus. Also, it probably can’t fix “dryness and frizz” in hair or prevent it from turning gray. That’s the kind of claim the FDA is looking out for. And more importantly, we know at this point that it can do some positive things. And here are three companies proving it…

Three CBD Stocks Worth Investing In

  • GW Pharmaceuticals (Nasdaq: GWPH)
  • Charlotte’s Web Holdings (OTC: CWBHF)
  • CV Sciences (OTC: CVSI)

GW Pharmaceuticals

We’ll start with the big one. GW has essentially built its future and reputation on prescription CBD products. It’s the parent company of Greenwich Biosciences – the maker of Epidiolex. It has also received approval of its Sativex therapy in several countries. This treatment is a cannabis-extracted spray containing CBD. It’s used to treat multiple sclerosis.

Even right now, as some of its therapies remain in limbo, GW stock is pricey. But it’s proven to be insulted from the price swings of the marijuana market. The company also has an impressive pipeline of therapies in the works… and approval of any of them could send this CBD stock skyrocketing.

Charlotte’s Web Holdings

Charlotte’s Web Holdings can be viewed as the bellwether of the CBD industry. If CBD sales are on the rise, this CBD stock will be one of the first to indicate it.

The company recently acquired the topical treatment manufacturer Abacus Health Products with the intention of increasing its product line. The plans have already paid off, with sales up 17%. And increasing product lines should only help the company’s bottom line. This Colorado-based company has deals with major retailers, including Kroger (NYSE: KR), The Vitamin Shoppe and CVS (NYSE: CVS). Once the FDA clears up the regulatory uncertainty surrounding CBD food products, you can expect this CBD stock to soar.

CV Sciences

This company has two distinct segments: consumer products and drug development. The consumer products one is straightforward. It focuses on manufacturing, marketing and selling CBD products. On the other hand, the pharmaceutical division is constantly trying to push the needle and develop novel CBD-based therapeutics. But the company already has the top-selling hemp-derived CBD oil on the market.

CV Sciences’ PlusCBD Oil was the first supplement to receive “generally recognized as safe” (GRAS) status. And the company continues to grow its product line. The company is in the midst of developing synthetic CBD-based medicine and is pursuing FDA approval for drugs. But again, once regulations around CBD are relaxed, this CBD stock is expected to see a major bounce.

The Bottom Line on CBD Stocks

Bills have been introduced to amend the Federal Food, Drug and Cosmetic Act and its regulations of hemp-derived CBD. The best guess as to why they haven’t moved forward is that Congress got distracted by the pandemic. But they should be picked up again. If the FDA finally gets out of the way, these CBD stocks are going to be major beneficiaries.

Unfortunately, for now the prospects of this budding industry are still tied up in politics. And the FDA’s approval (or lack thereof) can change the trajectory of these stocks quickly.

About Matthew Makowski

Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dogs Dorito and Pretzel.