Charlotte's Web Holdings (CWBHF 6.09%), a Colorado-based cannabinoid wellness company, saw its shares gain a healthy 13.8% Friday. This double-digit uptick marks the first time the stock has rallied in nearly a full month. In fact, Charlotte's Web's stock was down by a whopping 30% for the month, prior to this sudden, end-of-the month rally. What's more, this American cannabis stock was trading at all-time lows to boot.
Charlotte's Web's main attraction as a cannabis investing vehicle is its hemp-based cannabidiol (CBD) product line, which consists of oils, gummies, and capsules. Although CBD-infused products were forecast to grow into a multibillion-dollar market over the next 10 years, the Food and Drug Administration (FDA) threw cold water on this notion in late 2019.
Specifically, the FDA issued a warning to 15 companies selling CBD products about marketing these items in ways that violate the Federal Food, Drug, and Cosmetic Act. During the same press release, the agency also noted that the safety of CBD products is not well understood, especially for foods containing CBD. Since the FDA came out against CBD as a wellness product, Charlotte's Web's stock has lost over half of its value.
Can Charlotte's Web shares continue to rally in the week ahead? That's hard to predict due to the rather nasty market conditions right now. The good news is that the stock has definitely entered bargain territory, with its shares trading at just 4.29 times forward-looking sales. Most companies with rip-roaring sales growth like Charlotte's Web sport far richer valuations. Nonetheless, it remains to be seen whether or not bargain hunters will continue to test the waters with the top CBD player.