One closely watched Canadian cannabis company is HEXO Corp (NYSE: HEXO). This cannabis producer with a market cap around $2 billion is considered to be on the cusp of becoming one of the largest cultivators in the country, alongside names like Aphria, Aurora, and Canopy Growth.
While industry experts consider HEXO to be one of the best-positioned stocks for a rapid explosion in 2019, analysts were surprised to see the cannabis giant’s revenues fall in the third quarter.
Releasing their financial results late on Wednesday, HEXO insisted they were on track to meet their $400 million net revenue goal for fiscal 2020 as well as to double net revenue in Q4 fiscal 2019.
While most figures were solid, with a 98 percent increase in cannabis production from the previous quarter as well as an 8 percent increase in cannabis sales from the previous three months, analysts were surprised when revenues fell by 3 percent, instead of rising.
Most cannabis companies have reported drastic quarterly increases in revenue, which have become somewhat expected by investors in the industry. As many companies are losing favor for not growing fast enough, a business that reported revenues that remained the same, let alone fell, are seen as potential warning signs for investors.
“The past five years have seen the cannabis industry landscape, and our company, evolve significantly,” said HEXO CEO and co-founder Sebastien St-Louis in an official press release. “This evolution continues at a staggering pace, as HEXO ramps up production effort and significantly increases its inventory, further contributing to our capacity to meet the demand and to reach our sales and revenue targets. Our Innovation, Development and Engineering team has grown significantly ahead of the legalization of edibles and now includes 25 professionals with PhDs and extensive experience in major consumer packaged goods companies.”
HEXO, alongside Canopy Growth Corp, is particularly well positioned to take advantage of the second round of cannabis legalizations in Canada.
With CBD-edibles and beverages coming to market later this year, HEXO already has a partnership with Molson Coors (NYSE: TAP) to produce CBD beverages when they become legal. This is one of the main selling points for the company’s stock, as it’s expected that shares will surge once CBD-edibles become legalized.
Shares of HEXO didn’t tumble as much as one would have expected. The upcoming Canadian cannabis giant saw its stock fall by 3 percent over the course of the day, with an extra percentage point falling in after-hours trading. HEXO has followed the cannabis sector pretty closely over the past few months, rising and falling in tandem with the industry as a whole.
Hexo Company Profile
HEXO Corp is a consumer packaged goods cannabis company that creates and distributes innovative, easy-to-use and easy-to-understand products to serve the Canadian cannabis market.
The company serves adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand. The company offers dried cannabis; Elixir, a cannabis oil sublingual mist product line; and Decarb, an activated fine-milled cannabis powder product. – Warrior Trading News