Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Charlotte's Web Stock Spun Higher on Wednesday

By Rich Smith - Jan 6, 2021 at 5:05PM

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

Will marijuana turn legal in 2021? Investors vote yes.

What happened

Joining a broad-based rally in marijuana stocks Wednesday, shares of Charlotte's Web Holdings ( CWBHF -2.71% ) soared to close the day up 7.6%.

So what

The rally in marijuana stocks was understandable. The Democrats apparently took both Senate seats in Georgia yesterday, giving the party (which favors marijuana legalization) what amounts to a majority in the U.S. Senate.

Technically, the Dems only hold 48 seats, but two independents are broadly aligned with their party, and Vice President-elect Harris will be able to break any tie votes.

Marijuana plants

Image source: Getty Images.

Now what

That sounds like good news for proponents of legalized cannabis. I'm not certain, however, whether it does much to move the needle for Charlotte's Web, which purveys not marijuana per se, but rather hemp-extract wellness products, which are already legal in the U.S.

It certainly doesn't change the fact that, despite enjoying strong sales growth (in the years preceding the pandemic at least), Charlotte's Web remains unprofitable with negative free cash flow, and most analysts expect it to remain so for at least two more years.

That being the case, I suspect this is one stock rally that investors would be better off sitting out.

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.

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.
CWBHF
$1.25 (-2.71%) $0.04

*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
640%
 
S&P 500 Returns
139%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

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

Our Most Popular Articles

Premium Investing Services

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