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Analyzing the Top 3 CBD Companies to Buy in July

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President Trump legalized hemp in December 2018 by signing The Farm Bill. Hemp is a type of cannabis that contains more CBD (cannabidiol) and less THC (tetrahydrocannabinol). THC delivers the feeling of a “high,” which is generally associated with drugs. In September 2019, Arcview Market Research and BDS Analytics estimated that the CBD market would reach $20 billion by 2024.

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However, the FDA hasn’t approved any of the CBD products except Epidiolex, which treats seizures. Also, the FDA has kept THC and CBD products out of dietary supplements. THC and CBD products violate the Federal Food, Drug, and Cosmetic Act. So, the marketing or distribution of CBD dietary supplements has been prohibited. Amid the strong growth prospects and uncertainty, here are the top three CBD companies to buy in July. 

Charlotte’s Web Holdings is strong in the CBD space

Charlotte’s Web Holdings (NYSEARCA:CWEB) is one of the main players in the CBD business. The company shipped its products to over 11,000 national retailers at the end of March. Charlotte’s Web plans to keep expanding throughout this year. The company has also signed a national retail partner for its pet products. Meanwhile, Charlotte’s Web entered an agreement to acquire Abacus Health Products, which sells pain relief and skincare CBD products. 

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Abacus Health has a wide range of products, which are sold from more than 12,000 retailers across the country. The acquisition will likely be completed by the second or third quarter of this year. Together, the two companies have captured approximately 34.7% of the market share in the food/drug/mass retail segment. 

Meanwhile, Charlotte’s Web has underperformed the cannabis ETFs this year. YTD, the company has lost 50.6% of its stock value as of July 6. The company’s stock price fell due to weakness in the cannabis sector and its mixed first-quarter performance

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In the first quarter, the company reported revenues of $21.7 million, which beat analysts’ expectations of $20.78 million. However, the adjusted EBITDA losses came in at $5.7 million, which missed analysts’ expectations of a loss of $5.6 million. 

Canopy Growth keeps expanding

Canopy Growth (NYSE:CGC) entered the US CBD market in December 2019 with its “First & Free” brand. The company launched its products in 31 states, which have legalized the sale of CBD products. In the fourth quarter, which ended on March 31, the company expanded its portfolio of products by launching a portfolio of hemp-derived CBD creams. 

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Also, its subsidiary, This Works, launched a series of CBD skincare products in the US and UK markets. Meanwhile, This Work launched its stress-free hand sanitizer, which performed very well. Canopy Growth is also working with Martha Stewart and BioSteel to bring innovative CBD products to the US markets. Recently, Canopy Growth closed its hemp farming operation in New York to lower its expenses. 

So far this year, Canopy Growth has lost 17.9% of its stock value. The company’s stock price fell due to weakness in the cannabis sector and the lower-than-expected fourth-quarter performance. During the quarter, the company missed analysts’ revenue and EBITDA expectations. The company burnt 304.7 million Canadian dollars in cash during the quarter and withdrew its timeline for reporting a positive EBITDA.

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Cronos Group’s place in the CBD market

In September 2019, Cronos Group (NASDAQ:CRON) completed the acquisition of four subsidiaries of Redwood Holding Group. The acquisition gave the company access to the US hemp-based products platform, which includes skincare and consumer products. 

These products are sold under the brand name “Lord Jones” either online or through retailers and hospitality partners in the US. In the quarter that ended on March 31, the company’s US segment reported $2.2 million in revenue. The CBD products sold under Lord Jones contributed to most of the revenues. 

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Cronos Group also formed a joint venture unit called “Natuera” in Columbia. The joint venture developed a CBD distillate from hemp, which has been classified as a “non-controlled substance” by Colombia’s Narcotics Control Board. So, the company can export the product to the US. Meanwhile, the company completed its first test export in March this year.

YTD, Cronos Group has lost 14.9% of its stock value. Despite the fall, the company has outperformed its peers and cannabis ETFs. The strong backing from Altria Group, which has a 45% stake in the company, has mitigated the downside. In the recently completed quarter, the company reported a mixed performance. To learn more, read Cronos Group’s Q1 Revenue Driven by Higher Marijuana Sales.

Although other players, like Aurora Cannabis (NYSE:ACB) and HEXO (TSE:HEXO), have entered the CBD market, I’m bullish on these three companies. 

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