HEXO stock is one of the cannabis stocks that has been under severe selling pressure since late April, with Hexo Corp (TSX:HEXO) (NYSE:HEXO) being down over 50%.
Poor Earnings
It is a well-known fact that the entire marijuana sector has been in a bit of trouble over the past few months as supply issues hit hard and many of the biggest companies in the industry saw their stock prices nose-diving. That being said, many of the companies posted strong Q2 2019 results, and the stocks managed to bounce back.
However, the same cannot be said of HEXO, which continues to feel the heat from the factors that are currently plaguing the cannabis industry as a whole. HEXO stock has tanked by as much as 20% since mid-August and has been hovering around the $4 mark since then.
There is a belief that the recreational cannabis market in Canada is on the verge of going into a slowdown and in addition to that, HEXO’s financial results for its third quarter proved to be underwhelming as well.
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HEXO stock reached historic highs back in April when it hit $8.28, but since then it has been a downhill journey. In its recent quarterly results, HEXO Corp managed to generate $13 million CAD in revenues, which fell short of the $14 million CAD that analysts had been expecting. In addition to that, the losses soared to an alarming $7.74 million CAD, which reflects a massive rise from the $1.97 million CAD in losses in the prior-year quarter.
The cannabis industry as a whole is suffering at this point in time, but in the case of HEXO, the trouble is two-fold because the company’s performance has been highly disappointing for investors. While the slower growth in the recreational marijuana market in Canada has led to the crash of many stocks, another opportunity is lurking.
Health Canada is all set to legalize cannabis derivative products in October and sales could begin in late 2019. That presents an opportunity for HEXO stock as well as other companies to get their act together.
What do you think?
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