A selloff in the broader cannabis sector that kicked off in earnest in summer has finally brought Hexo Stock (NYSE:HEXO) down to its lowest price in two years. Several factors contributed to the selloff in Canadian cannabis stocks in recent months.
One of them was uncertainty over Canada’s national election. Some investors feared Justin Trudeau would lose his re-election bid and herald difficult times for the cannabis industry. The Trudeau administration has been very supportive of the cannabis industry in Canada.
The slow development of Canada’s regulated cannabis market weighed down by slow rollout of cannabis shops in provinces like Ontario also spooked investors, sparking a selloff in Canadian cannabis stocks. Hexo has no doubt been a victim of the selloff. But now the stock has bottomed out and looks poised for a powerful rebound.
Hexo stock closed up 14.5% in the last session, reversing a downtrend witnessed in the several previous sessions. Hexo’s gain in the last session came on big volume too, showing growing investor interest in the stock.
History repeats itself
Hexo stock has a history of bouncing back from the bottom. In late December of 2018, Hexo was trading at one of its lowest price levels at around $3. But the stock soon reversed course and sprinted to $6.10 by the start of February 2019, delivering a 103% return in a space of a little over one month.
By April, the stock was trading at $8.50, delivering a return of more than 180% for investors who picked up the stock at its lows in the fall of 2018. Hexo has bounced back several times this year and currently, the stock is at a spot where it is well-supported for a powerful comeback.
About Hexo Stock
HEXO Corp is a consumer packaged goods cannabis company. It is one of the largest licensed cannabis companies in Canada and operates facilities in Ontario and Quebec provinces. The company is also expanding overseas and has established a footprint in the Eurozone. Hexo serves both medical and recreational cannabis markets with its range of products.
In addition to Hexo’s history of bouncing back from its lows, there are even more reasons to love the stock for the long-term. Here are a few reasons:
- Hexo takes on its biggest competitor head-on
Hexo competes against many companies in Canada’s cannabis market. But its greatest competition is the cannabis black market. Now Hexo has set out to disrupt the black market. The company is introducing new products to entice consumers away from the black market.
Higher prices and limited product selections in the regulated market are some of the reasons people continue to purchase cannabis from the black market. Further complicating the picture for regulated cannabis businesses like Hexo is the scarcity of cannabis shops in some areas. In Ontario, for instance, only 24 cannabis shops have opened in a province of more than 14 million residents.
Therefore, the cannabis black market continues to dwarf the regulated market in Canada. For example, the sale of regulated cannabis products reached only $1.0 billion in the first year of pot legalization in Canada. But that is significantly smaller than the cannabis black market that pulled roughly $5.0 billion – $7.0 billion in sales in the first year of legalization.
Last month, Hexo launched a new cannabis brand called Original Stash that is aimed at disrupting the black market. Original Stash is competitively priced to lure consumers who may be drawn to cheap black market products. If Original Stash becomes a hit, it would not only help Hexo squeeze the black market but also boost its revenue and give it a bigger share of the cannabis market in Canada.
- Hexo continues robust revenue growth
Hexo’s revenue for fiscal 2019 ended July 31 hit C$59.3 million from C$4.9 million in the previous year, representing a growth of 1,110%. Hexo’s sales to the recreational cannabis market, which opened in Canada in October 2018, represented 72% of fiscal 2019 revenue.
“We are at the end of the first year of adult-use legalization in Canada, which was an incredible year full of successes and challenges across the industry. We’ve gone from $4.9M to $59.3M in gross revenue in just one year.
“This type of revenue growth is a testament to the company’s resilience and capacity to pivot in the face of uncertainty,” commented Sebastien St-Louis, co-founder and CEO of HEXO Corp.
Canada recently expanded its cannabis market with the legalization of more pot-based products. The sale of the newly legalized pot products in Canada will kick off next month and Hexo has adequately prepared to take full advantage of the expanded market. For example, Hexo teamed up Molson Coors Brewing to make a line of cannabis drinks that will go on sale immediately the sale of newly legalized cannabis products kicks off.
Experts predict that the recent legalization of more cannabis products could see Canada’s recreational cannabis market double to C$2.4 billion next year.
- Hexo sets sights on profitability
Hexo made a net loss of C$18 million in its fiscal 2019 ended July 31. But the company has set its sights on profitability and is employing a variety of strategies to get there. For example, Hexo recently cut hundreds of jobs and has idled its Niagara facility in a bid to cut costs. Moreover, Hexo hopes growing revenue fastest will help it attain its profitability target, which is why the company wants to make good use of the expanded recreational cannabis market in Canada.
Hexo has dropped significantly amid a broad selloff in cannabis stocks. But looking at Hexo’s history of bouncing back and seeing how the company has positioned itself to drive revenue growth, it looks to be an attractive cannabis bet at current levels.
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Disclosure: We have no position in Hexo stock and have not been compensated for this article.
What Do Investors See In Medical Marijuana Stock (OTCMKTS:MJNA)?
Medical Marijuana Stock (OTCMKTS:MJNA) has emerged as one of many investor’s favorite pot stocks in the legal cannabis universe in 2020. The stock is already up about 10% in 2020, demonstrating how investors have warmed up to the stock early on in the New Year.
Following a disastrous 2019, cannabis investors lost money but have also learned that their best bets are stocks with strong fundamentals. They are looking for companies that have positioned themselves well in the cannabis industry and have what it takes to go for the opportunities. That is why MJNA stock is catching a lot of investor attention in 2020 because of how it has positioned itself in the cannabis market.
Robust revenue growth and strong financial position have also helped put MJNA on the radar of investors hunting for quality cannabis stocks. Revenue at MJNA more than doubled from $26.5 million in 2017 to $60 million in 2018. MJNA is also not in financial distress as may be the case with other cannabis companies out there. The company finished the third quarter, the most recent reported period, with $5.5 million in cash reserves.
Moreover, MJNA has recently taken steps to expand into new international markets and invest in companies that are leaders in their segments. These prudent actions are helping lift Medical Marijuana stock as more investors learn about them.
About Medical Marijuana stock
Is Tilray Inc (NASDAQ:TLRY) A Buy Or Sell?
For Tilray Inc (NASDAQ:TLRY) and the rest of cannabis stocks, 2019 was no doubt a bad year. But 2020 is shaping up to be a promising year for the stock. To start with, Tilray stock has already gained 8.35% year-to-date. If that says anything, it shows following the broad selloff in Tilray stock last year, we’ve got to a point where sellers are giving way to buyers in the stock.
There are several catalysts that should continue driving NASDAQ:TLRY as you’re about to see. First, below is a brief profile of the company we’re discussing.
Tilray is a Canada-headquartered global cannabis company. It is engaged in activities of cannabis cultivation and processing as well as marketing and distribution of cannabis products. Tilray already has several cannabis products brands to its portfolio. It operates across five continents through subsidiaries in Canada, Australia, Germany, and Portugal.
Following the broad collapse of cannabis stocks in 2019, investors are looking for cannabis stocks that can make a positive impact on their portfolios in 2020. Tilray stands out as an attractive cannabis stock pick in 2020. Here are some of the exciting things about the company.
Tilray CEO sees a bright future for the cannabis industry
On January 25, Tilray CEO Brendan Kennedy spoke on Bloomberg. In that interview, Kennedy framed a rosy outlook for the…
Is Cronos Stock (TSE:CRON)(NASDAQ:CRON) A Buy?
Cronos Stock (TSE:CRON)(NASDAQ:CRON) stock fell 9.22% on January 24, marking its steepest decline so far in 2020. The stock plunge followed an important disclosure that you would only expect from a company that is trying to be straight and transparent with investors. Here’s what happened.
On January 22, after market close, Cronos made a regulatory filing detailing changes in its executive team. In that SEC filing, Cronos revealed that David Hsu and William Hilson have stepped down as its chief operating officer and chief commercial officer, respectively. Unfortunately, some investors read bad news in the executive exits and sold their shares in Cronos.
But a careful reading of the filing doesn’t seem to raise any red flags. Therefore, the big stock plunged points to investors panicking to the degree of responding to a mosquito bite with a missile.
There is no doubt that 2019 was a difficult year for cannabis stocks and Cronos Stock is no exception. But before the uncalled for reaction to Cronos’s regulatory filing, we had been at a point where sellers were starting to give way to buyers in Cronos stock. The stock has gained about 8.0% in the past one month. It had gained more than 13% year-to-date before the January 24 big selloff.
About Cronos Stock
Cronos Stock is a Canada-based global cannabis company. Cronos operates through subsidiaries and…