The most well-known pure-play CBD stock is hemp-oil and hemp-derived products producer Charlotte’s Web Holdings (OTC:CWBHF) .
Next up among pure-play CBD stocks is Charlotte’s Web’s greatest competitor: CV Sciences (OTC:CVSI) .
Explaining the buzz (and lack thereof) surrounding CBD
Pushing into new doors has certainly been a boon to the company’s top-line results. Sales grew 85% year over year in the first quarter to $14.9 million, with 190 basis points of gross margin expansion to 70.8%. However, it should be noted that CV Sciences lost $9.4 million in the first-quarter after numerous consecutive quarters of modest GAAP profitability. Then again, this loss was the result of stock-based compensation, rather than recurring operating expenses driving the company into the red. It actually netted a small profit on an adjusted basis.
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Like its peers, Elixinol is willing to spend to bear the fruits of its expansion. In Colorado, the company is expanding an existing production facility to approximately 20,700 square feet, which should help boost its CBD-based product output to about 24,000 bottles per day. The company also acquired approximately 23,000 square feet of land adjacent to this expansion should it desire even more production in the future.
On March 31, 2021, New York passed a law legalizing recreational cannabis, expanding medical use, and decriminalizing possession of small amounts of marijuana, among other measures. Not all of these provisions will go into effect immediately and there is no timeline yet on when all these measures will be fully implemented.
Marijuana stocks, as represented by the ETFMG Alternative Harvest ETF (MJ), have underperformed the broader market. MJ has provided a total return of 37.7% over the past 12 months, above the Russell 1000 index’s total return of 40.1%. These market performance numbers and all statistics in the tables below are as of July 26, 2021.
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. (CGC), Cronos Group Inc. (CRON), and Tilray Inc. (TLRY). Many big marijuana companies have continued to post sizable net losses as they focus on investing in equipment to speed up revenue growth, which remained strong despite the economic disruption caused by the global pandemic.
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.
Here are the top 5 marijuana stocks with the best value, the fastest growth, and the most momentum.
Momentum investing is a factor-based investing strategy in which you invest in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks which 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 stocks that had the highest total return over the last 12 months.
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.
Tilray (NASDAQ:TLRY) is another Canadian-based company that’s looking to generate sales in the hemp-CBD market south of its border. It may not have the star power of a Martha Stewart in the fold, but the company has a different advantage. In February 2019, Tilray announced that it closed its acquisition of Manitoba Harvest, which was a cash-and-stock deal worth 419 million Canadian dollars (approximately $322.7 million U.S. dollars).
However, the company isn’t waiting for its cultivation facility to be up and running before it starts tapping into the hemp market. In December, Canopy Growth launched First & Free, a product line for hemp-based CBD products that customers can buy online. The site currently offers shipping to dozens of states. And since hemp products are legal federally, they wouldn’t need to be sourced locally, as Canopy Growth would be able to ship them from Canada into the U.S. From a logistical standpoint, that helps the company be more efficient in its operations and keeps its costs down.
Canopy Growth (NASDAQ:CGC) may not be a big player in the U.S. hemp market today, but that could change quickly. The cannabis giant already has a license in New York to grow hemp and has a 308,000 square-foot facility in Kirkwood that the company expects to be operational in 2020. The company has not provided a firm launch date, but in April it did state that it plans to “recruit the full workforce in mid 2020.”
It’s an important move for Tilray, as Manitoba Harvest already has a wide range of hemp products in its portfolio, and they’re already sold in both Canada and the U.S. In addition to its popular Hemp Hearts brand of products, Manitoba Harvest also sells hemp oil and protein.
Marijuana may not be federally legal in the U.S., but that doesn’t mean the market for cannabidiol (CBD) isn’t about to heat up. Although CBD will have to be derived from hemp, as that was what U.S. legislators allowed in December 2018 when they passed the farm bill, there’s still a lot of interest in hemp CBD products. And for a couple of Canadian companies looking for more growth, producing hemp-based CBD products is an attractive way to get in on the hemp and cannabis craze in the U.S. Below are two stocks that could become forces in the industry in 2020:
Getting involved with Manitoba Harvest allows Tilray to accelerate its growth in not just the hemp CBD market in the U.S., but around the world. As of December 2019, hemp CBD products are sold in over 20 countries and are in 16,000 retailers in Canada and the U.S.
Tilray is already a significant hemp producer as a result of the acquisition; its most recent quarterly earnings showed hemp sales contributing $15.7 million over the past three months, slightly less than the company brought in from adult-use marijuana sales in Canada, which totaled $15.8 million.