Cantor Fitzgerald took a cautious view on the consumer CBD sector Tuesday.
Consumer CBD has "no obvious near-term catalysts," said analyst Pablo Zuanic.
Room for growth will be narrow in 2020, requiring investor scrutiny of stocks trading at high current sales multiples in the face of high expectations, he said.
Zuanic expects that consumer CBD companies will be required to invest more, and that FDA guidelines for the products will be unveiled in late 2020.
No CBD Product Returns
No noticeable changes have occurred on retail shelves despite the FDA's commentary on CBD, the analyst said.
Companies that Cantor follows have not experienced product returns, he said.
Nevertheless, this is something to watch for in the upcoming period, especially during annual or semi-annual shelf resets, Zuanic said.
Companies that aim to lead the industry will need to invest harder in their brands and significantly strengthen their online presence, he said.
“If there is door growth, this is unlikely to be in FDM, but more at what we would describe as more niche-type channels such as sports clubs, vape shops, cannabis dispensaries, and pet stores.”
Stock Picking Matters
Stock picking is still crucial, with consumer CBD stocks falling 43% in the last 90 days, Zuanic said.
During this period, Overweight-rated Aphria Inc APHA was an outperformer, with an 11% loss versus CannTrust Holdings Inc's CTST 64% plunge, the analyst said.
Among U.S. multistate operators, Truelieve Cannabis Corp TCNNF led with a 27% gain, while MedMen Enterprises Inc MMNFF fell by 80%, he said.
CbdMD Inc YBCD dropped "only" 36%, while CV Sciences Inc CVSI fell 79%.
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