Better CBD Stock: Charlotte’s Web vs. CV Sciences

Charlotte’s Web (OTC:CWBHF) and CV Sciences (OTC:CVSI) are both purveyors of cannabidiol (CBD) oil, and they’ve also been some of the most profitable cannabis-related operations in 2019. That’s because the nonpsychoactive component of marijuana is an ideal gateway product for consumers who don’t want to get high but still want to try marijuana for its perceived medical benefits.

Which of these top CBD stocks to buy is the better pick right now? Let’s stack them side by side to see which has a better chance to outperform over the long run…

The case for Charlotte’s Web

The new U.S. farm bill that recently legalized all hemp-based products, including CBD, has invited a swarm of potential competitors into this Colorado company’s home turf. Charlotte’s Web describes itself as the market leader in hemp-based CBD products, and it’s quite possibly the most established brand in the industry.

There were already hundreds of businesses processing hemp into high-margin CBD before the farm bill made it legal in every state, but that hasn’t diminished the strength of the Charlotte’s Web brand. In the space of one year, the company expanded its retail presence by 309% to 7,871 locations at the end of June.

The stock has risen around 51% over the past 12 months because it doesn’t look like Charlotte’s Web needed to significantly lower prices to grow sales in the face of increased competition. Revenue reported during the second quarter rose 45% compared to the previous-year period, while its gross profit after subtracting the cost of goods sold remained high at 73% of top-line revenue.

Unlike nearly all of its cannabis-producing cousins, Charlotte’s hemp-based CBD operation has been steadily profitable for a long time, but rapid expansion has kept those profits from growing recently. In the first half of 2019, operating expenses jumped 98% and they’ll probably grow much further in 2020. The company recently leased a new 136,610-square-foot industrial building and doesn’t expect it to run at full capacity for at least two years.

If demand for Charlotte’s CBD products doesn’t continue surging, the company could have trouble making ends meet. This concern hasn’t stopped investors from driving up its market cap to $964 million at recent prices, which is a lot for a company that will probably earn less than $10 million this year…

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