HEXO falls 27% on dismal fourth-quarter results, cannabis stocks tumble

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HEXO

Cannabis stocks seem to have little hope for this year. With shares of most companies continuing to fall, extending what’s already been a difficult 2019 year, investors have all but given up hope that 2020 will see things turnaround. With the coronavirus pandemic forcing many people to stay indoors and opt-out of unnecessary shopping altogether, retail marijuana sales have been falling.

As such, the two companies that reported their quarterly results today, HEXO (NYSE:HEXO) and Cronos Group (NASDAQ:CRON), were met with disappointment for the most part.

HEXO fell by around 27% after it reported its fourth-quarter financial results on Monday. The company, whose revenue increased by a mild 17%, reported an astonishing net loss of $298.2 million. This is exponentially larger than the mere $23.8 million in revenue the company reported. Understandably, investors were shocked by just how high this figure was, triggering a major sell-off in the stock.

We have continued our focus on improving our operations and expanding distribution across Canada.  Our strategy with Original Stash has demonstrated that we can directly compete with the black market,” said Sebastien St-Louis, CEO and co-founder of HEXO in a press release. “The industry continues to see challenges ahead, and following a strategic review of the Company’s core and non-core assets we believe we have positioned HEXO to meet these challenges head on.”

Hexo has said that while this coronavirus pandemic is going on, it keeping its manufacturing facilities open. While its encouraging all workers that are able to work from home to do so, many will still need to stay and operate said facilities. Wall Street analysts, such as Owen Bennett from Jefferies, warned investors on Monday that the biggest problem for HEXO would be raising extra funds that it needs, something that seems almost impossible in the current market climate.

The other cannabis company that reported its financial results was Cronos Group. The stock, which has, for a long time, been considered one of the more overpriced pot stocks on the market when looking at its ratios, ended up staying approximately the same by the end of the day.

In contrast, most of the cannabis sector was down significantly on Monday. Tilray also dropped by 27%, while Aurora Cannabis fell by 12%. Aphria, one of the few profitable cannabis companies, slide by 7%. Medipharm labs is another cannabis company that declined significantly, losing 18% of its value on Monday.

At the moment, there doesn’t seem to be much optimism for cannabis stocks. Although eventually the coronavirus situation will sort itself out and business will return to normal, it’s hard to say how the pot sector will look like when the smoke clears.

 

HEXO Company Profile

HEXO Corp is a consumer packaged goods cannabis company that creates and distributes, 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 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

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