HEXO stock underperformed last month. HEXO Corp (TSX:HEXO) (NYSE:HEXO) shares have declined roughly 17% from early May to present and currently sell for $6.24 USD on the NYSE American. With little news from head-office, the drop is likely attributed to rising tensions in the American/China trade war, which caused market-wide selloffs across multiple industries this month.
It's a concerning time for investors, and hard to know which way shares are going to go. But there are reasons why HEXO stock remains a potential cannabis play in 2019. Let's look at them.
HEXO Stock Potential Cannabis Play
Doubling Shares and Uplisting
Since the beginning of the year, HEXO stock has doubled its value on the Toronto Stock Exchange. The company also made an important leap onto the NYSE American Exchange, where shares have gained approximately 20% since listing. Uplisting bolsters these stocks in terms of liquidity, visibility, and validity.
Arguably, a bigger benefit that uplisting brings is the Wall Street coverage that comes with listing on a major exchange. This gives HEXO stock the chance to secure investment from major institutional investors that more-often-than-not won’t buy OTC-listed companies.
Supply Agreement with Quebec
HEXO stock benefits from the company's lucrative supply deal with its home province of Quebec. This gives HEXO Corp a huge advantage over competitors by securing it a market share of at least 30% in the province. It's a huge consideration because Quebec is the second-largest populated province in Canada, and further, the deal provides HEXO with a steady revenue stream for the next 3–5 years.
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Molson Coors Deal
In late 2018, HEXO Corp landed a major deal with Molson Coors Brewing (NYSE:TAP), which sent HEXO stock through the roof. The pair will create cannabis-infused beverages under a joint venture named Truss. For a small-capped company, landing this deal was not only a sign of management's prowess, but it also gives HEXO a significant leg-up for Phase II legalization expected later this year.
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Newstrike Acquisition
Most recently, HEXO wrapped up its acquisition of Newstrike Brands. The deal was an important step forward for HEXO's future as it will boost its annual production capacity to roughly 150,000 kilograms. The deal officially closed on May 28.
Is HEXO stock for you? Do you have any idea what else might have caused shares to dip in May? Let us know your thoughts!
Featured Image: Canva
