Many investors are intrigued by the explosive potential of cannabis stocks. With global cannabis sales set to hit $200 billion per year within the next decade, according to analysts at investment bank Stifel, it's easy to see why.
Plus, CBD sales in the U.S. alone could approach $24 billion by 2023, according to analysts at Brightfield Group, up from about $620 million in 2018.
This means that there is tremendous growth opportunity - if you know which horses to bet on.
Here is our list of the best cannabis and CBD stocks to buy right now:
Charlotte's Web Holdings
Charlotte's Web Holdings (OTC:CWBHF) owns the world's leading hemp-based CBD brand by market share. The company produces a variety of wellness products containing CBD, including oils, capsules, gummies, and topical creams.
Charlotte's Web's products can be found in more than 8,000 retail locations across the U.S., including some major chains such as CVS Health. Additionally, Charlotte's Web has a fast-growing e-commerce business, which accounted for more than half of its sales in 2018.
Charlotte's Web's sales received a powerful boost from the passage of the U.S. farm bill, which legalized hemp-based products at the federal level. The company is ramping up its hemp production and distribution network to meet the rising demand for CBD. It planted 862 total acres during the 2019 growing season, representing a 187% increase from 2018. It also recently struck a deal with Kroger, which will see the grocery giant roll out Charlotte's Web's CBD products to 1,350 stores in 22 states.
In all, the CBD leader's sales surged 74% to $69.5 million in 2018. Better still, analysts expect the company's revenue growth to accelerate to 83% in 2019 and nearly 150% in 2020.
Shares of Charlotte's Web Holdings (OTC:CWBHF) slipped 6.2% lower recently after falling as much as 13.7% earlier in the day. This marked the second consecutive day of large declines after the cannabidiol (CBD) leader reported its second-quarter results. The continued sell-off appears to be due, in large part, to investors' worries that Charlotte's Web's growth could be limited until the U.S. Food and Drug Administration (FDA) finalizes its regulations for CBD.
Charlotte's Web's products are now carried in more than 8,000 retail locations. However, many of those locations, including CVS Health and Kroger, only sell the company's topical CBD products. These major retailers don't want to risk running afoul of the FDA, which has expressed its displeasure about CBD food-supplement products that make misleading health claims.
The problem is that around 80% of Charlotte's Web's sales are generated by its CBD supplement products. Charlotte's Web CEO Deanie Elsner acknowledged in the company's Q2 conference call that big retailers aren't going to market its CBD supplements until the FDA hands down its regulations. Many investors appear to be focusing on the uncertainty about when the FDA decision will be made.
However, Elsner maintained that Charlotte's Web has multiple pathways to grow while it awaits the FDA's CBD regulations. She also expects that whenever those regulations are finalized, it will present a major catalyst for Charlotte's Web.
The company's full-year 2019 revenue guidance appears to back up Elsner's take. Charlotte's Web projects 2019 revenue will be between $120 million and $170 million. That wide range reflects the question marks surrounding what the FDA will do. Even on the low end of that range, though, it reflects nearly 73% year-over-year revenue growth.
KushCo Holdings (OTC:KSHB) is a wholesale supplier to companies serving the cannabis and CBD industry. The company doesn't deal in marijuana or cannabis derivatives itself, but sells supplies such as vaporizer parts, solvents, pre-roll papers, packaging, and labels to customers throughout the cannabis value chain. You may not have heard of this company because as Mark Twain put it, they sell "picks and shovels" in the gold rush, but it has put up breathtaking sales growth numbers for three years.
Although the company started out selling packaging solutions, that segment has diminished in importance -- it comprised only 14% of revenue in the latest quarter. KushCo's growth is now coming from its largest segment, vaporizer parts, which supply 69% of revenue, and from energy and natural products, which supplies extraction businesses with solvents and oil bases and contributed 11% of revenue last quarter.
KushCo's pivot to vaporizers and solvents for producing extracts is paying off brilliantly, as the U.S. market for concentrates is growing much faster than the market for marijuana flowers.
The company's two segments supporting the concentrate market are on fire. In the most recent quarter, vape grew 383% year-over-year and 58% sequentially. The company's energy and natural products category essentially didn't exist a year ago, and had sales growth of 69% over the previous quarter.
Put that all together and the company produced second-quarter revenue growth of 240% year-over-year, and 39% quarter-over-quarter, for a total of $35.2 million. KushCo raised its revenue guidance for the full year by $30 million, a whopping 26% at the midpoint. It's like another quarter of sales appeared out of nowhere.
This kind of head-over-heels top-line growth is nothing new for KushCo, having more than doubled sales in both 2017 and 2018. Clearly the company is serving its customers well and adding new ones every quarter.
CEO Nick Kovacevich is optimistic about the future. KushCo is optimizing its warehouses with a new management system, discontinuing free shipping to its customers, and solving quality problems, and will be enjoying some cost benefits from its increased scale. He believes the company could achieve 30% gross margin and be profitable in fiscal 2020.
Analyst consensus is a Strong Buy with a target price of $7.63.
That means this stock is a real bargain right now.
It’s a name that is often left out of the discussion because (1) it’s not looking to capitalize on the ongoing legalization of recreational marijuana, and (2) it has been around for years. But GW Pharmaceuticals (NASDAQ:GWPH) has absolutely earned a spot on any list of cannabis stocks positioned to double in the foreseeable future.
GW Pharmaceuticals is, as the name suggests, a pharmaceutical developer. It has worked diligently to extract the full health benefits of cannabidiol, or CBD, for prescription use. It convinced the Food and Drug Administration of that potential in June of last year, securing approval for CBD-based Epidiolex as a means of treating seizures … the first CBD-based drug permitted in the U.S.
The response has been nothing short of incredible. Some observers were expecting Epidiolex to reach a total of $65 million, total, this year. By the end of the second quarter, GW Pharmaceuticals had actually sold $102 million worth of the drug.
The analyst consensus is Strong Buy with a target price of $221.
GP Solutions (OTC:GWPD), is not really a cannabis stock at all, but is positioned to parallel the market's strong growth.
The company is a leading developer of automated micro-farms, and sells its "GrowPods" globally.
The company recently announced that it struck a licensing deal with Micro Lab Farms, which sells the GrowPods exclusively to the cannabis sector.
GrowPods are finely tuned, automated, transportable and scalable micro-farms that have been shown to grow all types of crops, including cannabis, at a faster rate than conventional means of agriculture.
GrowPods allow cultivation to take place year-round, which maximizes ROI. The systems are sealed from outside pathogens, contaminants, pesticides and chemicals, and produce clean and robust crops.
GP Solutions was recently named one of the top 7 vertical farming companies in America.
And if the growth in the cannabis sector isn't enough, the vertical farming market will grow to $3 billion by 2024, from virtually nothing a few years ago.
Accordingly, this company is enjoying growth from multiple sectors.
The company is young, lean, and with lots of potential, but since it is a relative newcomer, it doesn't have a long history of stock performance... so if you are the type of investor that likes to read the technicals, it will be a short scan.
The bottom line is that with a foot in two rapidly growing markets, and technically superior products, GP Solutions is poised for tremendous growth.
It's a good sign when the CEO your company terminated, still buys more of your stock.
Bruce Linton says he bought more stock in Canopy Growth (NYSE:CGC) (TSE:WEED) — even though the cannabis company he co-founded fired him earlier this summer.
“It was a right time for them to make the change, and it was the right time to buy the stock,” Linton said Tuesday in an interview with CNBC. “We have an awesome team there, and when it’s cheap you buy more,” he said.
Canopy, the world’s largest publicly traded cannabis company by market value, announced in July that Linton was removed as co-chief executive officer and a member of the board. Linton called into CNBC later that morning and said he was fired.
“I think stepping down might not be the right phrase,” he said, referring to the language in the company press release. “I was terminated.”
Linton had suggested that Constellation Brands, Canopy’s largest shareholder, wanted a leadership change. Constellation said at the time that the company fully supports the decision to appoint Mark Zekulin, who had been co-CEO with Linton, as Canopy’s sole CEO.
Canopy shares have struggled since Linton’s departure, sliding last week on disappointing quarterly results. Linton said Tuesday people “misunderstood” the quarter.
“There’s this big headline number, but when I look at stocks and look at quarterly announcements, I really don’t care about the noncash affecting things. ... I just look at the actual losses and where they spent their money. It wasn’t that big, and what they spent it on was intellectual property and growth,” he said.
Canopy Growth has lost 15.3% of its stock value since it reported its first-quarter earnings on August 14. For the quarter, the company missed analysts’ top-line and bottom-line expectations.
In April, Canopy Growth reached a high of 70.71 Canadian dollars. Since then, the stock has experienced downward momentum. Canopy Growth stock has fallen 1.5% YTD (year-to-date) as of Tuesday. However, many analysts believe it will soon turn around.
Alliance Global cut the target price for the stock to $55 Canadian dollars from $67 Canadian dollars with a “buy” rating. Cowen and Company cut the target price to $48 Canadian dollars from $82 Canadian dollars with a “outperform” rating. PI Financial reduced the target price to $50 Canadian dollars from $80 Canadian dollars with a “buy” rating.
This presents a buying opportunity for those willing to risk a bit of downside to achieve some upside.
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