The Province of Quebec is the second biggest cannabis market in Canada. Being a dominant player here puts a cannabis company in line for strong revenue returns. With 35% of the market share, HEXO Corp (TSX:HEXO) (NYSE:HEXO) is one such company in a very lucrative position. Its position is so strong, in fact, that HEXO stock is widely considered undervalued by a number of analysts.
“Given current levels of capacity, along with a 35% market share in the Province of Quebec, the company is poised to see significant revenue gains.”
As an investor, will HEXO stock return dividends to you down the line? Well, at the current price of $7.30 CAD on the Toronto Stock Exchange (down 1% on the day), analysts at SeekingAlpha believe it will.
Specifically, a top analyst at the firm says:
“I believe the stock to be currently significantly undervalued by some 60% based upon what it could earn from its production capacity.”
If any cannabis stock is to gain 60% in the short term, then the company’s production capacity needs to be massive.
It’s still early days. The company is working towards goals; a year-end market valuation of $1.9 billion is one of them. HEXO Corp’s current market cap stands at $1.5 billion approximately, so if HEXO can grow that much in nine months, HEXO stock should gain in kind.
The company is expecting a six-figure yield of cannabis by the year-end. It is already expanding its 1 million sq. ft. Gatineau facility in order to make this possible. The 35% market share of Quebec means it will be supplying the province with over 200,000 kilos of marijuana over the next five years. Snagging a massive 5-year deal such as this highlights the strength of HEXO’s management. This could be what brought beer-maker Molson Coors (NYSE:TAP) on board too.
Cannabis Drinks Market
The venture with Molson Coors should push HEXO stock further when the pair launch their joint venture later in 2019. Primarily focused on non-alcoholic, cannabis-infused beverages, the duo is in line to increase revenue lines exponentially when the massive edibles arm of the cannabis sector becomes legalized later in the year.