By Matt McCallAug 14, 2019
There’s a big milestone that, sooner or later, every company needs to reach — and that’s positive earnings. In a word: profits.
That sounds obvious, like “Business 101.” In fact, it’s one of the most basic requirements for a stock to trade on the “Big Board,” the New York Stock Exchange (NYSE)… and also for the Nasdaq, for that matter.
But in the cannabis industry, very few have achieved profitability. Charlotte’s Web (CWBHF) is one of those few.
Charlotte’s Web was one of the original hemp-cannabidiol (CBD) companies, and perhaps the biggest success story of Colorado’s legal cannabis boom.
CWBHF is also my pick for InvestorPlace’s Best Stocks for 2019 contest – but really, it’s a top cannabis play for the next three years, at least, and here’s why:
With news today that the company’s Q2 revenue rang in at $25 million, Charlotte’s Web is expecting to post sales of $120–$170 million for the year. (At the midpoint, that puts the stock at a very attractive price-to-sales ratio of just 6X). But next year, analysts are expecting sales of $348 million… and $444 million the year after that.
If that sounds lofty, keep in mind that Charlotte’s Web CBD will soon be in twice as many stores as it was last year. From a niche product that was mainly found in health stores, you can now buy it at “big box” stores like CVS Health (CVS) and, now, Kroger (KR).
The deal with Kroger, just announced on July 31, is big; it adds 1,350 stores (in 22 states) to Charlotte’s Web’s retail network. The total number of retail locations carrying the company’s products stood at 7,817 at the end of the quarter, up 1,926.
Demand for hemp-CBD and this particular brand is booming, and to keep up, Charlotte’s Web just expanded into the prestigious Colorado Technology Center, strategically located between the cities of Boulder and Denver.
With the new location, Charlotte’s Web will quadruple its footprint. After all, to make hemp-CBD, you’ve got to process a lot of hemp. And while operations will begin “early next year,” the growth opportunity there will be just beginning.
The Colorado Tech Center is better known for its tech startups, and Charlotte’s Web is bringing some of that same energy to this expansion. Rather than resorting to CBD extraction techniques that are “decades old,” their ambition is to use state-of-the-art technology to maintain what’s always been the company’s edge: “the highest-quality products.”
Here’s another significant edge: reputation. The truth about the CBD market is that there are a lot of bad players – and those other guys will soon be removed by the coming wave of federal regulation. As I always say in Investment Opportunities, this is one industry that needs regulators. And as a legitimate leader of the industry, Charlotte’s Web will be the beneficiary.
That’s the context of the company’s eye-catching earnings-per-share (EPS) projections. Already leading the pack with $0.27 per share expected this year, that should increase to $0.74 next year and $1.06 in 2021.
The stock is up 75% since I picked it for the Best Stocks contest, even after it stumbled on today’s quarterly report. But given these projections, CWBHF is still a steal as it trades around $20 on the over-the-counter (OTC) markets.
As for the major stock exchanges – which open up a whole new world to companies like this – Charlotte’s Web is on the right track to meet the NYSE and Nasdaq’s earnings requirements for the long term. And I always believe in investing in a great stock early – BEFORE it makes that jump.
Given that it’s fully legalized on its federal level, Canada is always a popular place to look for cannabis investments, too. And one of my picks there just announced that it will “jump” to the Toronto Stock Exchange. (Charlotte’s Web did, too, for that matter.)
When a company moves to the big leagues, it opens up lots of doors for financing, offerings, and big institutional money. It’s like the market’s “seal of approval”: an elite status with long-term benefits to the share price.
In the next six to 12 months, I expect this particular Canadian stock to announce a second uplisting – to a U.S. exchange. That would be even more significant.
Business wise, I’d put its extraction operation up against anyone’s. At Investment Opportunities, you can get all the details on this and other up-and-comers in the legal cannabis mega-trend.
Early stage investing can be exciting… but also tricky.
When a new industry booms – when billions of dollars are up for grabs – you can be sure all kinds of people will rush into the sector and try to get their share.
Some of the companies will have smart, hardworking people running the show… great people to invest with. But, let me tell you, some of these folks aren’t the kind of people you’d ever want to invite over for dinner… let alone do business with.
That’s a fact of life in any industry. But this challenge is magnified in a new industry with massive potential – like the legal marijuana industry.
This is why it is critical to have a system… a framework for evaluating legal marijuana stocks.
So, I created a 5-Factor Analytical Model for evaluating newly public legal marijuana companies to as part of my Cannabis Cash Calendar.
And I just released my latest stock play last night. Click here for more details on the Cannabis Cash Calendar, and get ready to take part.
P.S. A path to profitability is certainly one of the things I look for here. But there’s a little more to it than that!
You can learn about the other four requirements in my 5-Factor Analytical Model by clicking here.
I’ve put my model to the test in recent weeks to uncover my next Cannabis Cash Calendar recommendation… which I just released last night to my Investment Opportunities readers. But there is still time for you to get in on it, too!
The opportunity in legal weed is much like the opportunity internet stocks offered in 1994… or that bitcoin offered in 2015. It is set to grow so much over the next 10 years that it will turn out to be one of the three biggest investment opportunities of your entire life – no matter when you were born.
You don’t want to miss the chance to get in on this trend early. And you can get in on my new Cannabis Cash Calendar pick right away. Click here to learn more and find out how you can get immediate access to my new recommendation.
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