The CBD market is set to grow at an astonishing rate. The driver behind this boom appears to be about mainstream adoption among North American consumers. That’s the heart of the process.
Right now, recent research from the Brightfield Group shows 2019 to be the breakout year where CBD announces itself onto the grand stage for investors, with the full market for CBD products set to grow by over 900% this year. You just don’t see numbers like that across an entire industry.
What’s driving this remarkable acceleration?
The odds-on bet is that this further ramp in growth is tied to the increased commonality of CBD-based products on the shelves of big brand-name mainstream retailers. That puts the substance squarely on the radar of the average American shopper.
We think this could lead to a resurgent performance of CBD stocks to close out the year and kick off 2020. As such here are four names that could lead the charge: Canopy Growth Corp (NYSE:CGC), Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF), Sun Kissed Industries Inc. (OTCMKTS:SKDI), and Aurora Cannabis Inc (NYSE:ACB).
Canopy Growth Corp (NYSE:CGC) has is clearly working hard to get its claws into the CBD space as a leading player as growth estimates from leading analysts ramp higher. The advantage we see with CGC is that it has in-house leadership that knows how to get the job done across multiple markets and models. It’s in their DNA.
They have a strong and well-developed venture arm, and understand how to scale a new strategy. The mere fact that CGC is targeting expanding scope of business in CBD could have other players in the space shaking in their boots.
CGC managed to take in revenues of over $90M in its most recent quarterly data – which represents a rate of top line growth of nearly 250% on a year/year basis. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($3.2B against $372.8M).
Canopy Growth Corp (NYSE:CGC) engages in growing, possession, and sale of medical cannabis in Canada. Its products include dried flowers, oils and concentrates, softgel capsules, and hemps.
According to its own materials, the company offers its products under the Tweed, Black Label, Spectrum Cannabis, DNA Genetics, Leafs By Snoop, Bedrocan Canada, CraftGrow, and Foria brand names. It also offers its products through Tweed Main Street, a single online platform that enables registered patients to purchase medicinal cannabis from various producers across various brands.
In the company’s words, “Canopy Growth is a world-leading diversified cannabis and hemp company, offering distinct brands and curated cannabis varieties in dried, oil and Softgel capsule forms. From product and process innovation to market execution, Canopy Growth is driven by a passion for leadership and a commitment to building a world-class cannabis company one product, site and country at a time.”
We would also emphasize the globally diversified nature of this company, with operations in 12 countries across five continents.
One of its most important divestitures and strategic interests is Canopy Rivers Inc., a unique investment and operating platform structured to pursue investment opportunities in the emerging global cannabis sector. The company works collaboratively with Canopy Growth to identify strategic counterparties seeking financial and/or operating support.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) is the best-in-class as far as pure-play names in the CBD space. There’s not much argument there.
But the stock is valued on that basis, and may not have the ability to scale up to keep in the game with some of the bigger players if they go “all in” as adversaries, introducing some market share risk into the game.
In any case, at this point, this is the leader in terms of the most widely distributed brand of pure CBD products among publicly traded names. And they have executed well, by and large.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) develops and distributes hemp-based cannabidiol (CBD) wellness products. Its products include CBD hemp oils, capsules, topicals, and pet products that feature CBD hemp oil extracts.
The company sells its products online as well as through distributors, and brick and mortar retailers. Founded by the Stanley Brothers, the company’s premium quality products start with proprietary hemp genetics that are responsibly manufactured into whole plant hemp extracts naturally containing a full spectrum of phytocannabinoids, including CBD, terpenes, flavonoids and other beneficial hemp compounds. Industrial hemp products are non-intoxicating.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) pulled in sales of $33.5M in its last reported quarterly financials, representing top line growth of 50.6%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($67.2M against $18.3M).
The company’s most recent release announces its partnership with Nielsen (NYSE:NSLN), the leading market research firm (think, TV ratings).
According to the release, “Together, Nielsen and Charlotte’s Web will help guide the U.S. retail market for consumer packaged goods (CPG) companies through the evolution of the CBD space. Mirroring the changing tide happening across the U.S. retail and CPG industry, this new relationship marks an open and symbiotic relationship that is forming between the emerging CBD industry and the U.S. retail and manufacturing community.”
Sun Kissed Industries Inc. (OTCMKTS:SKDI) is a speculative play in the space to get on your radar ASAP.
This is an illiquid name right now. But the company’s most recent release – out this morning – is extremely suggestive of some sort of major M&A move on the way in the next few days. Basically, you’re going to see a major acquisition here, and then this is going to be a big player in the space. It has all the hallmarks. Keep a weather eye on the horizon.
According to the release, “We have been quiet in recent months, but a lot of action has been going on under the surface. Significant announcements are forthcoming as we aggressively pursue an immediate acquisition that will position the Company as an emerging leader in the CBD products marketplace. We are already in advanced stages of negotiation with a very promising high-growth target.”
That says about all you need to know.
Sun Kissed Industries Inc. (OTCMKTS:SKDI) bills itself as an emerging leader in the CBD-based products marketplace.
The Company is pursuing meaningful acquisitions as part of an aggressive M&A strategy designed to position Sun Kissed as a dominant player in a well-defined, high-growth niche within the rapidly expanding CBD sector.
Again, we would have this one firmly on the radar given the highly suggestive messaging going on in that release.
Aurora Cannabis Inc (NYSE:ACB) has done everything to signal its commitment to gaining big traction in the CBD space but change its name to “Aurora CBD”. Consider this series of actions:
In 2017, the company invested in Hempco, a Vancouver-based maker of hemp-based foods, hemp fiber, and hemp nutraceuticals. Hempco also supplied Aurora with raw hemp for extracting CBD. ACB bought the rest of Hempco three months later.
The company next acquired Agropro, Europe’s largest producer, processor, and supplier of certified organic hemp and hemp products. At the same time, Aurora acquired Agropro’s sister company Borela, which processes and distributes organic hulled hemp seeds, hemp seed protein, hemp flour, and hemp seed oil.
Just after that, in late 2018, Aurora acquired ICC Labs, which claims leadership in the South American hemp CBD market, with a large-scale extraction facility that can process 150,000 kg of CBD feed annually.
That’s three big M&A moves in the past 30 months with one clear goal: to capture major market share in the CBD space. And it spans three different continent. This is a company on a mission and investors who believe in the larger growth thesis should take note now.
Aurora Cannabis Inc (NYSE:ACB) managed to rope in revenues totaling $98.9M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 416.7%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($362M against $436.4M, respectively).
In addition, the company has demonstrated rapid organic growth and strong execution on strategic M&A, which to date includes 15 companies – MedReleaf, CanvasRX, Peloton Pharmaceutical, Aurora Deutschland (formerly Pedanios), H2 Biopharma, Urban Cultivator, BC Northern Lights, Larssen Greenhouses, CanniMed Therapeutics, Anandia Labs, HotHouse Consulting, Agropro, Borela, and ICC Labs.
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