Last week, HEXO Corp announced a significant acquisition, buying Toronto's Newstrike Brands for a cool $263 million CAD. The news sent HEXO stock soaring, peaking at $9.49 on Tuesday. One big deal about this big deal is production capacity. Because now, HEXO is in a whole new ballpark.
Let's check this out.
HEXO Stock
The all-stock deal will do important things for HEXO (TSX:HEXO) (NYSE:HEXO). Notably, it will further cement domestic supply within Canadian provinces. This is good. But what stands out the most is the momentous increase in production capacity now afforded to HEXO Corp.
According to the Motley Fool, the deal adds "470,000 square feet of production capacity to the more than 1.3 million square feet of cultivation space the company already has."
In acquiring Newstrike Brands (TSXV:HIP), HEXO has added over 1/3 of production capacity to what it already had. This should reflect on HEXO stock down the line. Because now, if we look at its peers, HEXO is set to be the sixth largest cannabis grower in North America. Prior to this deal, HEXO estimated annual output of 108,000 kilos; now it's estimating 150,000 kilos at its peak.
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This places HEXO among "Canada's growing elite" and for a mid-tiered company, that is an impressive place to be.
The Takeaway
At the time of writing, HEXO stock is seeing some corrections after a week of steady gains. Selling for $6.61 USD on the NYSE, it is down 1.6%.
There's no denying that HEXO stock remains a firm favorite among investors. It is one of those cannabis companies continually making all the right moves. The Newstrike acquisition will only build upon an impressive partnership list that already includes Molson Coors Brewing (NYSE:TAP) and the province of Quebec.
HEXO stock could move fast in the next few weeks as the company now places sixth in terms of annual capacity. Further, it has the edibles market on the horizon; there is a lot of potential to come.
Featured Image: Canva
