Charlotte's Web stock could double this year as the US CBD market continues to grow despite a high degree of regulatory uncertainty, according to several analysts.
Competitive Market
The CBD market in the US has become incredibly competitive in recent years, with over 4,500 brands currently in operation, according to MarijuanaBreak, as demand for hemp-derived products continues to soar following the passage of the updated Farm Act in 2018. This saturated field leaves consumers with limited ability to ascertain the brands with the best quality for the price, meaning the top brands will eventually rise to the top as the market matures. This means Charlotte's Web stock could double from its current price of $6.00 as Charlotte's Web Holdings (TSX:CWEB) (OTCQX:CWBHF) continues to dominate the market.
Regulatory Limbo
The US CBD market is currently stuck in a state of limbo. While industrial hemp farming and the sale of hemp derivatives such as CBD were federally legalized in December 2018, the FDA currently upholds restrictions on allowing hemp-infused CBD in food products, with further regulatory uncertainty meaning huge gaps exist in the quality of oil from brand to brand on the retail shelves.
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However, a bipartisan group of US lawmakers is hoping to push through the House Bill H.R.5587, which would instruct the FDA to remove any restrictions on the use of hemp in food products. Analysts at TipRank argue that such a bill would push Charlotte's Web Holdings' revenue estimates back towards topping US$350 million, with news of the bill leading to a rally in Charlotte's Web stock to above the $10.00 mark in January.
Upside for Charlotte's Web Stock
Analysts have updated 2020 revenue targets to only US$150 million due to 85% of the potential retail sales coming from products where the FDA uncertainty has caused retailers to pull back on stocking CBD products. However, Charlotte's Web Holdings has deals in place with mass retailers such as Kroger (NYSE:KR), and analysts believe that the upside remains for CBD firms with access to around 10,000 retail stores when the FDA eventually removes regulatory restrictions.
Charlotte's Web stock currently has a consensus 'buy' rating from TipRank's three analysts, with a price target of $13.05 for the next 12 months.
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