Is Investing in CBD Stocks a Good Idea?

The growing awareness of CBD among the general public and its effectiveness in treating pain and other treatments is driving the growth of the industry. With the potential for federal legalization and the development of products, investing in CBD stocks could be a great opportunity. We have added current analyst estimates and company fundamentals to each company on the list using the Stock Rover fundamental analysis platform. You can use Stock Rover's 14-day free trial to view the latest statistics, pairs and stock analysis.

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people achieve financial freedom through our website, podcasts, books, newspaper columns, radio programs and premium investment services. Sometimes the best time to invest in a relatively new market is after the initial euphoria has evaporated. That could very well be the case with investing in CBD stocks. CBD is short for cannabidiol, which is a chemical substance found in the cannabis plant.

CBD doesn't produce a high, but it has been found to have therapeutic benefits. While federal legalization was a key milestone, the United States still has not finalized regulations for CBD dietary supplements. As a result, the CBD opportunity in the US has not yet met investors' high ambitions. However, there is increasing pressure for CBD regulations to be relaxed.

Congress has been involved in bills to change federal regulation of CBD products. For a time, Canopy Growth ranked as the world's largest marijuana stock based on its market capitalization. It remains one of the largest companies in the cannabis industry, with leading positions in the Canadian medical and recreational marijuana markets and in the German medical cannabis market. Canopy Growth cannot enter the US market cannabis and maintain its price in the main US stock market while marijuana is illegal at the federal level.

However, the company is already an actor in the US. Charlotte's Web markets a wide range of CBD products from bath and beauty to edible and topical products. It even sells CBD products for pets. The company's CBD products are available at more than 14,000 retail outlets and around 8,000 healthcare professionals also distribute Charlotte's Web products.

More than half of its total revenue comes from direct-to-consumer e-commerce sales. Cresco Labs is an US-based cannabis producer and retailer with seven at the top. The company is not just a cannabis producer and retailer but also wholesaler of branded cannabis products containing CBD, including their Wonder gummies. Cresco has achieved great success in recent years with its revenues growing significantly both organically and through acquisitions.

Cresco's strong balance sheet should also allow it to continue expanding into new markets. Jazz Pharmaceuticals also has other growth engines in its range such as drug for sleep disorders Xywav which is gaining momentum as well as sales of another medication for sleep disorders Sunosi, blood cancer drug Rylaze and lung cancer drug Zepzelca. The Valens Company is a good example of ancillary companies that support the industry which can sometimes have even more attractive prospects than mere plays. Valens is the largest third-party extraction company serving the Canadian cannabis industry using different methods to extract cannabinoids (including CBD) from cannabis.

Valens also markets its own cannabis products which is part of its strategy to transition to a leading consumer packaged cannabis product company. The company's Green Roads is already among the 10 best CBD brands in the US with its products available in approximately 7,000 stores.

Tonia Kilcullen
Tonia Kilcullen

Freelance social media practitioner. Lifelong writer. Typical social media specialist. Award-winning internet advocate. Devoted beer scholar.