cbdMD (YCBD) is a Charlotte, North Carolina-based provider of consumer hemp-based cannabidiol (CBD) products, including gummies, tinctures, topical, bath bombs, vape oils and pet products. The company was founded in March 2015 and went public in December 2018.

The U.S. CBD market has been expanding rapidly since the 2018 Farm Bill removed hemp from the same schedule 1 drug classification as marijuana. CBD product sales skyrocketed by 706% between 2018 and 2019, and the market is projected to wrap up 2020 with $7.38 billion in sales. According to a forecast by Statista, CBD sales in the U.S. have the potential to reach $23.7 billion by 2013.

However, the regulation of CBD products is fragmented in this country. The U.S. Food and Drug Administration has only approved a single CBD product, the epileptic seizure medication Epidiolex, and has warned on its website that it remains “concerned at the proliferation of products asserting to contain CBD that are marketed for therapeutic or medical uses although they have not been approved by FDA.”

At a state level, CBD regulatory laws vary, with certain states requiring consumer registration prior to purchases and others prohibiting the sales of certain merchandise. 

Despite the complexity of the U.S. market, cbdMD has recently gained attention with its first nationally viewed TV advertising campaign, its new partnership with the popular Joe Rogan Experience Podcast and the expansion of its product line within the Save Mart Supermarkets chain serving California and Nevada. The company also boasts partnerships with PGA golfer Bubba Watson, Bellator MMA, Life Time Fitness and Barstool Sports.

Here’s how our proprietary POWR Ratings system evaluates YCBD:

Trade Grade: C

YCBD is trading at $2.97, which is closer to its 52-week high of $4.10 than to its 52-week low of $0.51, which it hit in March when the coronavirus pandemic fueled the markets’ sharp tumble. The stock lost momentum in August following a mildly disappointing Q3 earnings report, but has been regaining its footing following the company’s optimistic Oct. 14 preliminary forecast of its Fiscal Q4 and Fiscal 2020 earnings and several recent business developments, including the Dec. 28 announcement of its entry into the U.K. market with a direct-to-consumer e-commerce site. 

Buy & Hold Grade: C

The stock’s proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, would rate YCBD much higher considering its recent trading performance. However, the company’s latest earnings report has kept the stock from soaring further.

YCBD’s Q4 recorded net sales of $11.7 million, up 23% year-over-year from $9.5 million in Q4 of Fiscal 2019, while Fiscal 2020 saw net sales soar by 77% year-over-year to a record of $41.9 million from $23.6 million one year earlier. The Fiscal 2020 sales were bolstered by the company’s Paw CBD pet brand, which racked up $4.5 million in net sales during its first full fiscal year.

However, YCBD’s Q4 also saw its gross profit margin dip to 54% from 57% in the fourth quarter of fiscal 2019, which was mostly attributed to an approximate $1.66 million in non-cash inventory adjustment during the quarter. The Fiscal Year 2020 loss from operations was $17.6 million, compared to $14.8 million one year earlier. 

Nonetheless, YCBD provided net income attributable to common shareholders for Fiscal 2020 of approximately $12.2 million, or $0.28 per share, compared to a net loss of approximately $50.4 million, or $2.82 per share, in the previous fiscal year.

Peer Grade: B

YCBD is ranked #91 out of 240 stocks in the Medical – Pharmaceuticals category. Admittedly, this is a crowded category with major multinational corporations dominating the field. Yet YCBD is holding its own, ranking higher than major names including Astrazeneca (AZN) and Zogenix (ZGNX).

Industry Rank: A

The Medical – Pharmaceutical industry ranks #18 out of 123 stock categories and has an Average POWR Rating of B.

Overall POWR Rating: C (Neutral)

Despite recent announcements that show the company’s marketing prowess, YCBD is not quite at the level where its potential is translating into performance.

Bottom Line

While it is still a relatively small company, YCBD is in the middle of a fast-growing industry and its prospects in 2021 are positive.  So while it might not be a Buy quite yet, keep this one on your radar in the next few months.

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YCBD shares . Year-to-date, YCBD has gained 31.42%, versus a 17.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...

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