Hexo Hits All-Time Low As Preparations For Beverage Launch Continue
Investing.com | Nov 05, 2019 14:05
Canadian cannabis grower Hexo Corp (NYSE:HEXO), (TSX:HEXO) laid claim to the third-worst performing stock on the Toronto Stock Exchange yesterday, losing 5.23% on the day to close at C$2.72. The stock has been steadily heading south since reporting earnings last Tuesday. Its performance in New York mirrored the downward trajectory.
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In fact, the U.S.-listed shares have shed 75% of their value since May. They hit their all-time high on Apr. 30, trading at US$8.28, compared to their close yesterday of US$2.07—a new all-time low.
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The price bottom comes on the heels of last week’s disastrous performance review where the company reported its adjusted net loss had grown C$56.7 million (US$43.22 million} in the last quarter, substantially greater than the C$7.8 million (5.95 million) shortfall in the previous quarter. This brought the total adjusted loss for the fiscal year to C$81.56 million (US$62.17 million).
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These less than stunning results also came less than two weeks after the Quebec-based grower announced plans to slash its workforce by about 25%, a move that was required, the company said in a statement, to keep the company on track to profitability.
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On the upside, Hexo reported a small gain in net revenue, up to C$15.4 million ($11.7 million), compared with C$13 million (US$9.9 million) the previous quarter.
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It would be difficult to blame investors for wondering: has Hexo lost its mojo?
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Answering that question will depend on how you view the future in the cannabis space. Several other marijuana growers will be reporting in the coming weeks. Will Hexo be the predictor of what is ahead? Or will it be the exception?
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But investors who have been on the sidelines—watching, waiting and wondering how this new untested frontier is going to play out might opt to view this as the perfect time to jump in before the 2.0 products hit the streets.
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Hexo, which has entered into joint ventures with Molson Coors Brewing (NYSE:TAPa), the makers of Coors beer and Truss Beverages, will launch CBD-infused drinks, including a brand of spring water, which will be publicly marketed in the coming months.
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Canopy Growth's (NYSE:CGC), (TSX:WEED) blockbuster US$4-billion (C$5-billion) partnership with U.S. beer maker Constellation Brands (NYSE:STZ) made headlines when it was announced last November. Now it is about to trigger what officials with the Ontario-based cannabis giant are hoping will be an explosion of interest in pot-infused beverages.
Canopy is preparing to roll out an array of about 50 new products, including infused drinks that will be bottled in a new plant that Constellation Brands has helped design. According to a published news report, Canopy will launch a new brand of gummies in April followed by a lineup of infused drinks in the summer.
Analysts are cautious about the size of the infused beverage market, however, Canopy Growth shares closed up yesterday, at US$20.15 (C$26.51), up just over 2% on the day. The company reports its next earnings on Nov. 14.
h2 Size Matters/h2The latest statistical data has revealed a few interesting facts about the cannabis market on both sides of the Canada-U.S. border.
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According to the latest report by New Frontier Data, an estimated 29.9 million pounds of cannabis will be cultivated in the United States in 2019, with the bulk of it—58.8%—being grown in California. The next four top producing states include Oregon, Washington, Colorado and Florida.
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North of the border, Statistics Canada released figures last week that show the legal cannabis industry grew by 116% in the first 11 months following legalization.
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The cannabis market contributed C$7.92 billion (US$6.04 billion) to Canadian GDP in August, an increase from the figure of C$7.02 billion (US$5.35 billion) last October.
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Meanwhile, a leading cannabis analyst reportedly predicts revenues in Canada’s cannabis sector will more than double to C$3.16 billion (US$2.41 billion) despite the regulatory problems the industry has experienced in the initial rollout.
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According to a report by BNN Bloomberg, Cannacord Genuity analyst Matt Bottomley predicts cannabis industry revenues to surpass the C$3-billion (US$2.29-billion) mark in 2020, topping the C$1.46-billion (US$1.11-billion) expectation for 2019.
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