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Why Charlotte's Web Stock Spun Higher on Wednesday

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

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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.

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Charlotte's Web Holdings, Inc. Stock Quote
Charlotte's Web Holdings, Inc.
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