HEXO Stock Drops Amid Concerns of Flooding in Gatineau Facility

HEXO stock

HEXO stock rallied in the middle of April following the Bank of America's bullish calls, but on Tuesday HEXO Corp (TSX:HEXO) (NYSE:HEXO) lost 5.56%, closing at $7.82 on the NYSE American following concerns of flooding near its Gatineau facility in Quebec.

Flooding Concerns in Gatineau Facility

HEXO Corp has, however, indicated that the facility is not at risk. Floods hit the Ottawa River, causing flooding in parts of Quebec but the Gatineau facility appears to be dry. The rain is expected to continue through Thursday, dumping close to 1.5 inches of rainfall in the region.

In an email statement, a HEXO representative stated that the Gatineau facility is safe and that the company was continuously monitoring water levels. If need be the company is prepared to take necessary action. The statement indicated that the facility was not affected during the 2017 floods and therefore there is no cause for alarm for either the facility or for HEXO stock as a result.

Although this statement indicates that the Gatineau facility was not affected by flood in 2017, in its FY2017 statement, the company indicated a $88,234 write-off because of flooding at the facility. The company indicated that the discrepancy was attributed to an equipment malfunction that caused flooding.

The facility’s annual production capacity is 108,000 kg of cannabis, and it covers 10,000 square feet of manufacturing facilities for milling, extracting, dewaxing, and distilling. There is also a 1 million square foot greenhouse in the area from which the company completed its first harvest at the beginning of this year.

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Interim CFO

This morning, HEXO Corp announced the nomination of Steve Burwash as interim Chief Financial Officer. The company said it is still looking for a CFO to succeed Ed Chaplin, who announced in January that he was leaving the company after April 30. HEXO expects to conclude its search "in the near future."

However, HEXO stock recovered over 2.80% in Wednesday's session.

Bank of America's Bullish calls

The Bank of America’s bullish calls for HEXO stock led to its rallying from mid last month. Bank of America analyst Christopher Carey backed HEXO stock, giving it a buy recommendation and setting a target price of $10 per share. His price target was 66% higher than the closing price of HEXO a day before.

HEXO has a market capitalization of $1.4 billion, and thus HEXO stock’s low valuation was the reason behind the bullish calls. In the past year, HEXO stock has jumped 137%, with the S&P 500 index climbing 11%.

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