HEXO stock has been under pressure over the past few months amid earnings disappointment from several popular cannabis companies. Let's analyze the recent performance by HEXO Corp (TSX:HEXO) (NYSE:HEXO).
Acquisition of Newstrike Brands
Despite the doom and gloom in the cannabis sector for much of the year so far, many companies have continued to make a range of highly important moves. One such company is HEXO, which has managed to make the kind of moves that could make it one of the most important players in the industry in the long-term. The acquisition of Newstrike Brands back in March was an excellent move as it would significantly raise its production capabilities.
Additionally, the company also managed to get a credit line facility worth $65 million from two of Canada’s renowned institutions. It is a significant development since it would allow the company to expand its business far more aggressively.
Entering the Cannabis Beverage Market
However, there is an even bigger reason why HEXO could be one of the marijuana stocks to consider. The company entered into an important joint venture with alcohol and beverage behemoth Molson Coors Breweries (NYSE:TAP). The joint venture is known as Truss, and it aims to enter the cannabis-laced beverage space in a big way.
HEXO stock is up 1.33% at $3.82 on the NYSE.
The cannabis beverage market is expected to grow into a huge industry in a few years, and this joint venture could be the company’s ticket into profitability. Wall Street analysts expect the company to turn a profit by next year.
That being said, it is also important to keep in mind that the ultimate success of the cannabis industry is tied to the eventual legalization of marijuana in the United States. At this point in time, it is not yet clear when that is going to happen, if at all. That is definitely one of the threats for the industry at this point in time.
However, it is also important to note that the legalization of edibles in Canada later this year is something that could prove to be a major positive for HEXO. At this point, HEXO stock could well be a bargain for investors.
What do you think?
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