The cannabis sector has struggled mightily over the past year, with the ETFMG Alternative Harvest ETF (MJ) down 43%. But the future may not be all dark. The CBD market appears to be a bright spot.
With the passing of the 2018 Farm Bill, the United States has opened up to CBD. The bill resulted in the federal legalization of industrial hemp. Prior to the bill, all cannabis products, including CBD, were treated the same as marijuana. This led to a new industry altogether, the CBD industry.
In a report from Brightfield focused on the CBD industry, analysts are calling for sales of $23.7 billion by 2023.This represents a tremendous opportunity for CBD companies to capitalize on that opportunity.
An interesting company flying under the radar is cbdMD (YCBD). cbdMD owns and operates a consumer hemp-based cannabidiol (CBD) brand, cbdMD. The company’s product line includes CBD gummies, tinctures, topical, bath bombs, Vape oils, and pet products.
YCBD has been posting some impressive results. Over the past year sales have grown 64.3%. Yesterday, the company reported preliminary fourth quarter and fiscal 2020 results. The company reported that year over year net sales are expected to increase between 76% and 77% and year over year quarterly net sales is expected to increase between 21% and 23%. YCBD also reaffirms its commitment to reaching positive adjusted operating income in calendar 2020.
Martin Sumichrast, Chairman and co-CEO of cbdMD stated, “cbdMD continues to generate outstanding sales growth while reaffirming its commitment to reaching positively adjusted operating income during calendar 2020. Our direct to consumer (DTC) net sales channel is performing very strong and we expect to report an increase between 71% and 72% of net sales from 62.5% in fiscal 2019. As we look ahead into 2021, we expect the CBD industry to grow appreciably. We believe that this moment in time represents a singular investment opportunity.”
These estimates reflect the strong growth potential for the CBD market, which is already starting to show results for YCBD. I highly favor CBD products right now, compared with cannabis, due to its widespread use, and general appeal. Its favorable legal environment also helps.
At just over a $100 million market cap, cbdMD has the potential to capitalize on the robust growth prospects of the CBD market. Keep this stock on your radar for the rest of 2020 and beyond.
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YCBD shares were trading at $2.19 per share on Thursday afternoon, down $0.09 (-3.95%). Year-to-date, YCBD has declined -3.10%, versus a 9.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More…
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