HEXO Stock: Why Isn’t the US Market Tempting Enough?

HEXO stock

HEXO stock performance in April was interesting. For the first time in 2019, these shares declined significantly—falling more than 10% by mid-month. Shares turned it around, however, and by month-end HEXO Corp (TSX:HEXO) (NYSE:HEXO) had increased an overall 15%.

HEXO Stock in April

The comeback was attributed to an influential analyst from Bank of America, Christopher Carey, naming HEXO stock a "top pick in cannabis." He gave HEXO Corp a "Buy" rating and a price target 66% over HEXO's closing price of $5.95 USD the previous day.

His ambitious sentiment helped to secure a bullish momentum that has since continued into May.

Today, HEXO stock remains in the green, selling for $7.76 USD at the time of writing. While most analysts seem to agree with Carey's touting of HEXO Corp, there is a potential red flag that might hold investors back.

US Expansion?

HEXO Corp is a kingpin in Canada, but it is yet to hold a significant position outside of Canada. Until it does this, the potential revenues it is afforded are likely to be tepid compared to what they could be.

Yes, it has a deal with giant beermaker Molson Coors (NYSE:TAP). This is potentially the key to HEXO's dominance outside of Canada (especially in the US), but until we see this partnership in action, it remains speculative.

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HEXO stock investors will have to wait until cannabis-infused beverages become legal in Canada, but even then, we don't know how long it will be until these drinks make their way south.

But with cannabis entirely legal in certain US states, this venture shows real potential for major revenue. Especially considering Molson Coors has an established global reach and operations in the US.

It does remain a wonder, however, why HEXO isn't aiming for the US outside of beverages—via hemp-derived CBD for example? Many of its peers are.

HEXO Stock: Europe Expansion

The company does have its eyes set on Europe though. Through a partnership with the Greek company Qannabos, HEXO plans on entering into the European cannabis market.

"The move will provide the company presence in Europe to supply a full suite of brands in France, the United Kingdom, and other European markets once regulations permit.”

The Takeaway

With major markets outside of Canada emerging or already established—think Europe and certain US states (California alone is worth more than all of Canada combined)—there's a lot of potential that HEXO Corp has yet to seize.

Until HEXO stock shows it can compete effectively outside of Canada, investors may be holding off.

What do you think? Is HEXO stock a play?

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