HEXO stock is down over 20% on Thursday after HEXO Corp (TSX:HEXO) (NYSE:HEXO) released its preliminary fourth quarter and fiscal 2019 results.
HEXO Halves Expected Revenue
HEXO Corp says it expects to post net revenue for its fiscal Q4 ended July 31 to be approximately $14.5 million CAD to $16.5 million CAD, a steep cut from the expected figure of $26 million CAD, and net revenue for the fiscal year to be $46.5 million USD to $48.5 million USD. The company's CEO and founder, Sebastien St-Louis, blamed lower than expected product sell-through on the disappointing returns but said that the company is making significant changes to its sales and operations strategy to better these results. HEXO shares sank 22% today to $2.86.
HEXO Stock Down on Withdrawn Guidance
The underwhelming results have also led the Quebec-based company to withdraw its previously issued financial outlook for the fiscal year 2020. HEXO stock was one of the market's stronger performers in the first half of the year, with the company issuing guidance of up to $400 million CAD in net revenue for 2020."Withdrawing our outlook for fiscal year 2020 has been a difficult decision," said St-Louis. "[...] given the uncertainties in the marketplace, we have determined that it is the appropriate course of action. We are also placing a greater focus on profitability."
>> How the Fitness World is Embracing Legal Cannabis
HEXO Corp has been struggling under the weight of a nascent industry that has yet to really live up to expectations. While many pot stocks braced for a "green rush" following legalization 12 months ago, the market has yet to really get going. HEXO stock has been impacted by slower than expected store rollouts, a delay in government approval for cannabis derivative products, and early signs of pricing pressure. The company has pinpointed a delay in store openings in key markets, which have prevented access to target customers, as the primary reason for its struggles.
The Takeaway
Legalization 2.0 comes into effect on October 17, paving the way for a host of cannabis derivatives to hit shelves by mid-December once the necessary paperwork is filed, and investors in HEXO stock will be hoping that this provides the catalyst for the company to begin living up to the hype.
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