Leading the CBD Industry
First and foremost, it needs to be pointed out that Charlotte's Web has diligently grown its business to emerge as the biggest player in the CBD industry. Moreover, it should be borne in mind that it is a highly competitive industry and the retail partnerships it has solidified has been a big part of the growth.
By the end of September last year, the company had access to as many as 9,000 retail outlets, thanks to national distribution deals it has signed with Vitamin Shoppe and Kroger. More importantly, the company has been largely profitable although it did suffer a setback to the bottom line in the most recent quarter.
Leadership
The other important thing to keep in mind is that Charlotte's Web’s leadership in the CBD market also places it in a unique position to move into derivative products. Derivative products are a high margin business and one that the company could turn into a significant strength.
The fact that hemp production and hemp-based CBD is now legal in the United States, is a major advantage for the company. Its products can now be made available in dispensaries far more easily.
That being said, there are certain factors that need to be borne in mind by investors. The all powerful United States Food and Drug Administration (FDA) recently proclaimed that it is still reviewing whether to allow CBD in edibles.
Moreover, the FDA added that CBD can be harmful and the experts are still in a learning curve. In recent times, the agency has gone after companies that operate in this space and in fact, sent a warning letter to Curaleaf and others with regards to claims made on their product labels.
Last but not least, Charlotte's Web has also started spending a lot more in order to raise its capacity and that eventually led to a $.01 per share loss in the third quarter.
Charlotte's Web is a market leader with approximately $93M in annual sales and $35M in cash, makes it definitely a long-term play. In addition, Charlotte's Web is 114% away from its 52-week high and only 29% away from its 52-week low. Therefore, risk versus reward is low, which also makes it attractive to short-term investors.