Canadian cannabis is in chaos right now. But amid the madness, some stocks stand to benefit. HEXO stock could be one of these. Shares of HEXO Corp (TSX:HEXO) (NYSE:HEXO) are currently selling for $4.85 USD and are down 5.83% at present.
What's going on in the cannabis sector?
Can HEXO Stock Stand Out?
In the span of approximately one week, the sector was thrown into chaos by two major reports in particular. Canopy Growth (TSX:WEED) (NYSE:CGC) fired its co-founding CEO, and a few days later, CannTrust Holdings (TSX:TRST) (NYSE:CTST) failed its Health Canada audit. The news caused cannabis shares to plummet across the board, and the sector is still reeling.
A major concern from this combination is that, now, there won't be as much dried cannabis hitting the market in 2019.
HEXO stock wasn't immune to the sector lull, but these shares have already faced their own battle. Share prices dropped below $5 following a weak quarterly report. But the company remains on track to reach $400 million CAD in sales in fiscal 2020, and with major competitors Canopy and CannTrust both stalled, HEXO Corp can take advantage of the lack of product coming to market.
According to Smarteranalyst:
"Having both Canopy Growth and CannTrust in chaos helps the pricing power that HEXO needs to reach this aggressive revenue target."
With two competitors that are less aggressive now, this could spell a potential win for the company.
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HEXO Annual Production
HEXO Corp is ramping up annual production capacity to 150,000 kg and acquired Newstrike Brands earlier in the year to do so.
The short-term prospects for HEXO appear bearish, but the long-term sentiment is undoubtedly positive; HEXO stock has an average “BUY” rating from 13 analysts.
Plus the company will list, as of July 16, on the NYSE (as opposed to the NYSE American). For its small size, the listing offers it the potential for sizeable investments from major institutional investors who, more often than not, won’t invest in companies on the more ambiguous OTC markets.
Takeaway
HEXO stock is trading low as the entire cannabis sector is pulled down by significantly bad press from competitors. However, is the lull temporary? It's likely. The current sentiment is understandable:
"[S]ome of the aggressive growth plans from competitors will get reined in by the market."
But this leads to a potential win for HEXO stock as "it has the ability to grab more market share while facing less pricing pressure making for a good stock pick at the lows."
What are your thoughts on this?
Featured Image: Canva
