Please ensure Javascript is enabled for purposes of website accessibility

Why Charlotte's Web Holdings Stock Popped on Friday

By George Budwell - Feb 28, 2020 at 6:38PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Charlotte's Web had a much-needed reprieve from its long-winded downturn on Friday.

What happened

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. 

So what

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.

Chemical formula for CBD, with a cannabis leaf in the background.

Image Source: Getty Images.

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. 

Now what

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.  

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Charlotte's Web Holdings, Inc. Stock Quote
Charlotte's Web Holdings, Inc.
$0.45 (6.09%) $0.03

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.