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Why Shares of Charlotte's Web Holding Bounced 10.6% Higher Today

By Keith Speights - Oct 2, 2019 at 5:29PM

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The CBD stock nearly recovered all the lost ground from Tuesday's big decline.

What happened

Shares of Charlotte's Web Holdings ( CWBHF 0.82% ) closed 10.6% higher on Wednesday. The nice bounce came after the stock sank 10.9% on Tuesday. Yet again, Charlotte's Web didn't have any news to cause a major swing. Instead, today's move was apparently just another example of the sometimes inexplicable volatility associated with hemp- and cannabis-related stocks.

So what

When a stock posts a big gain or a big loss as Charlotte's Web has done for two consecutive days for no apparent reasons, the best thing for investors to do is...nothing. Instead, stay focused on the underlying prospects for the company.

CBD oil bottle next to hemp

Image source: Getty Images.

Charlotte's Web is betting on major growth in the U.S. hemp CBD market. The company has significantly boosted its production capacity. It's increased staffing as well. While opinions vary as to how big the hemp CBD market might be, nearly everyone agrees that there's plenty of room for growth.

Perhaps the most noteworthy sign that its prospects are quite good is the impressive growth in the number of retail stores that carry the company's CBD products. So far this year, its retail distribution network has more than doubled to over 8,000 stores, including major retail chains such as Kroger and The Vitamin Shoppe.

Now what

Revenue should continue to soar throughout the rest of 2019 and into next year. The question, though, is just how much growth the company will be able to achieve. Its full-year guidance calls for revenue between $120 million and $170 million -- a really wide range.

The company couldn't be more specific because of uncertainty about what actions the Food and Drug Administration will take regarding regulating CBD products. With the process still underway, the stock could continue to be highly volatile for a while.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Charlotte's Web Holdings, Inc. Stock Quote
Charlotte's Web Holdings, Inc.
$1.23 (0.82%) $0.01
The Kroger Co. Stock Quote
The Kroger Co.
$45.11 (3.87%) $1.68
Vitamin Shoppe, Inc. Stock Quote
Vitamin Shoppe, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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