While the hemp-based products theme had a massive hey-day a couple years ago to great fanfare among investors, the bear market that has ensued in the space has been stunning. But, we would strongly maintain, it is a cyclical market process amid a continuing long-term structural bull expansion that is built of a “mainstreaming” dynamic that represents the evolution of this market from a niche localized phenomenon to a mainstream global household product category.
That may represent a big opportunity for investors at this stage because many of the stocks in the space with commercial-stage operations are selling at dirt-cheap prices if one assumes their fortunes will follow the theoretical structural upswing implied by the long-term projected path of that mainstreaming process.
It’s a bit like a commercial real estate developer buying up land on the coast in Greenland ahead of an accelerated process of global warming: it’s cheap now. But it could be tropical resort beach property in time.
However, there will no doubt be twists and turns to this narrative ahead. With that in mind, we take a look at a handful of interesting prospects in the space here, including: Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF), Medical Marijuana Inc (OTCMKTS:MJNA), Cannabis Global Inc (OTCMKTS:CBGL), and Cronos Group Inc (NASDAQ:CRON).
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) bills itself as a company that 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.
Charlotte’s Web Holdings, Inc. sells its products online as well as through distributors, and brick and mortar retailers. Charlotte’s Web Holdings, Inc. is the market leader in the production and distribution of innovative hemp-based cannabidiol wellness products.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) recently reported financial results for the second quarter ended June 30, 2020, including consolidated revenue of $21.6 million vs. $25.0 million in Q2-2019, adjusted gross profit of $14.0 million (excluding inventory provisions), or 64.8% of consolidated revenue, adjusted EBITDA loss of $5.7 million, and Direct-to-Consumer eCommerce sales that increased 33.6% year-over-year and contributed 71.8% of Q2 revenue.
“Second quarter revenue was below expectations due to the impact of COVID-19 on retail sales,” stated Deanie Elsner, CEO of Charlotte’s Web. “However, our DTC sales increased 33.6%, largely offsetting declines in B2B retail sales. We made excellent progress building out our infrastructure and expanding our products portfolio with the closing of the Abacus acquisition. Abacus CBD Medic™ products are now being sold through our online store and we look forward to realizing more cross-selling revenue synergies with Abacus through our FDM partners.”
It will be interesting to see if the stock can break out of its recent sideways action. Over the past week, the stock is net flat, and looking for something new to spark things. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -24%.
Charlotte’s Web Holdings Inc (OTCMKTS:CWBHF) pulled in sales of $30M in its last reported quarterly financials, representing top line growth of -10.3%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($136M against $62.6M).
Medical Marijuana Inc (OTCMKTS:MJNA) has to be mentioned as a player in the CBD space. The company has been around forever, and managed somehow to remain on the pink sheets with unaudited financials for all that time, which is rare and an obvious red flag. And investors should note that the stock has been basically dead money over the past decade, acting as a dilution machine. But it has operations in the space and is a known entity.
Its products range from patented and proprietary based cannabinoid products to seed and stalk or isolated high value extracts manufactured and formulated for the pharmaceutical, nutraceutical, and cosmeceutical industries. The company licenses its proprietary testing, genetics, labeling and packaging, tracking, production, and standardization methods for the medicinal cannabinoid industry.
Medical Marijuana Inc (OTCMKTS:MJNA) recently announced that it has reached a two-year milestone for long-term stability testing on its flagship THC-free cannabidiol (CBD) oil product Real Scientific Hemp Oil-X™ (RSHO-X™). The stability study was conducted in strict compliance with FDA/ICH guidelines (Q1A-R2). The study was outsourced to one of the most qualified cGLP/cGMP compliant Contract Research Organizations (CROs) with ISO 17025 accreditation and certification.
“As a Company of Firsts, we are excited to announce that we now have the first CBD hemp oil product on the market to have a proven two-year shelf life. This is the gold standard within the industry for shelf life and, just like many of the testing benchmarks and methods that we have developed for the industry, we believe that other CBD companies will begin testing their products for a similar stability standard and together we will further legitimize the CBD industry,” said Medical Marijuana, Inc. CEO Dr. Stuart Titus. “We will continue to look for new and innovative ways to prove our products’ safety and efficacy.”
Even with that news, the action hasn’t really heated up in the stock, with shares moving net sideways over the past week. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -13%.
Medical Marijuana Inc (OTCMKTS:MJNA) managed to rope in revenues totaling $11M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -46.9%, 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 ($5M against $10.5M, respectively).
Cannabis Global Inc (OTCMKTS:CBGL) is a rapidly emerging “rising star” in the space that may be set to gain increasing attention now that the company is starting to book commercial growth.
The company boasts a stockpile of R&D IP that spans hemp-based alcohol substitute mixers, sweeteners, and beverages, as well as proprietary methods of producing exotic cannabinoids at commercial scale.
Cannabis Global Inc (OTCMKTS:CBGL) recently launched its Hemp You Can Feel™ hemp-based alcohol substitute cocktail mixers, which are now live for sale on Amazon.com and Amazon Prime in addition to the already available Hemp You Can Feel™ Coffee pods. The mixers currently come in three flavors: Margarita Jalapeño (see here), Skinny Classic Cosmopolitan (see here), and Hibiscus Mint Lemon (see here). According to the release, the Hemp You Can Feel™ mixers provide an experience on par with light alcohol consumption, but without any of the harmful side effects of alcohol.
“Our in-house research suggests these mixers have tremendous home-run potential as a popular product line,” remarked Arman Tabatabaei, CEO of Cannabis Global. “Almost universally, the feeling of having a cocktail is desirable, but the collateral consequences of chronic alcohol consumption are well documented and certainly well understood by most consumers. We only recently launched the Hemp You Can Feel™ hemp-based alcohol substitute cocktail mixers. But getting this line of products on the powerful Amazon.com platform widens our reach immensely.”
CBGL shares held chart support in a basing range in September and enter October with an active bid that could represent accumulation given repeated failures to break under the $0.08/share level in liquid trading.
Cannabis Global Inc (OTCMKTS:CBGL) just recently broke the seal on commercial-stage operations in its last quarterly update. And, given the strong R&D foundation, it’s not hard to see a pick-up in active trading interest as catalysts mount.
Cronos Group Inc (NASDAQ:CRON) casts itself as an investment firm in the biopharmaceutical space, with a strong emphasis on medical marijuana and cannabis-related research and products. In short, the company seeks to invest in other companies, either licensed or actively seeking a license, to produce medical marijuana pursuant to Canada’s Marijuana for Medical Purposes Regulations (MMPR).
The firm typically invests in companies based in Canada. The firm is primarily an equity investor, may also advance debt as appropriate. It seeks to make minority investments with appropriate governance and shareholder rights. The firm seeks board representation consistent with the size of the investment but does not need control.
Cronos Group Inc (NASDAQ:CRON) recently announced the launch of its leading medical brand PEACE NATURALS™, in pharmacies throughout Israel through Cronos Israel.
According to the release, Cronos Israel’s operations include the cultivation and production of PEACE NATURALS™ branded products at the company’s facilities, located in Kibbutz Gan Shmuel, in Israel. Currently, Cronos Israel sells dried flower in the medical market and expects to launch cannabis oils and pre-rolls in the near future. As one of the first medicinal cannabis brands in Canada, established in 2013, PEACE NATURALS™ has always stood for high-quality products and a whole health approach to patient care. To maintain consistency, Cronos Israel has imported both dried flower and cannabis plant cuttings from Canada. The Cronos Israel facility now operates independent crop cycles which conform to the characteristics of the products the Company sells in Canada and Germany, and which products are sold in Australia by the Company’s investee, Cronos Australia Limited.
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 6% in that timeframe. CRON shares have been relatively flat over the past month of action, with very little net movement during that period.
Cronos Group Inc (NASDAQ:CRON) pulled in sales of $13.7M in its last reported quarterly financials, representing top line growth of 33.8%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($1.8B against $320.4M).
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