Charlotte’s Web Holdings Screams Higher On Tentative Farm Bill Agreement

Benjamin A. Smith
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Charlotte’s Web Holdings Inc (CNSX:CWEB) had quite an eventful session. Down well into double-digits in early trade, the stock came roaring back on news that a tentative Farm Bill agreement had been reached. We take a closer look at the catalyzing event.

The negative start in CWEB stock was predominantly due to earnings released after the bell on November 27th. While the company continues to be one of the few North American cannabis LPs posting a black net income figure, the headline revenue number came in light. The company reported Q3 revenue of $17.7 million versus $17.2 million the quarter previous, handily missing a handful of analyst expectations.

In a market which has punished nearly all such transgression, Charlotte’s Web wouldn’t escape a similar fate. Immediately on-open, CWEB traded down to the day’s low print of $13.05/share—or about ↓15.75% below the previous day’s close. After quickly stabilizing, CWEB proceeded to trade in a tight range between $14.00-14.40 from 10:00am into late afternoon trade.

And then it happened.

After weeks of on-again/off-again rumors surrounding passage of the Farm Bill, word of a tentative agreement hit the newswires.

That was enough to send Charlotte’s Web into orbit, erasing a high single-digit loss and flipping it into a ↑5.87% gain. Several other companies specializing in CBD oil production & distribution—such as CV Sciences Inc.—participated as well.

As Charlotte’s Web Holdings is a market leader in the production and distribution of cannabidiol wellness products, it stands to benefit greatly from Farm Bill provisions that would legalize industrial hemp. Market analysts—such as cannabis research firm Brightfield Group—expect demand for CBD products to explode as unfettered accessibility lowers input costs while simultaneously boosting CBD oil affordability for the average consumer. As the Brightfield Group puts it:

“Once CBD is fully legalized, we expect that market to absolutely explode, with sales hitting $22 billion by 2022, which is higher than the US Cannabis industry… That growth will absolutely be a result of legalization.”

While the half-life of this specific catalyst remains unclear, it’s another shot-in-the-arm for a cannabis industry having a stellar week. The last couple of days has seen South Korea legalize medical cannabis, Brazil approve a medical marijuana bill, New Jersey move one step closer to recreational sales, and Massachusetts officially commence its cannabis recreational market. Recreations sales, too, will open in Michigan on December 6th. This is the best run of macro industry news investors have witnessed in awhile.

Midas Letter will have further coverage as events warrant.

Benjamin A. Smith

Benjamin A. Smith

Ben is a research analyst and capital markets professional with nearly 20 years of experience. His areas of expertise are broad-based, and include extensive knowledge of macro economics, stock/derivative trading, commodity complexes, cryptocurrencies and technical/quant analysis. He also maintains an particular affinity for U.S. politics and the macro-regulatory environment facing...
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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

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