HEXO: Is This Pot Stock Set to Explode?
The Canada-based hemp stock, Hexo Corp (NYSE: HEXO) had a good run in the last week and gained over 25%. On Friday, this hemp stock gained 7.66% on the NYSE stock exchange and 6.25% in the Toronto exchange since its previous close. Is HEXO pot stock set to explode with growth?
HEXO stock price has more than doubled in the last month. Investors were initially optimistic about the rebound in marijuana stocks due to stellar quarterly results from pot giant Aurora Cannabis, which drove HEXO stock higher. Now the company announced strong fiscal Q3 results which have contributed to the recent uptick in HEXO’s stock price.
HEXO’s Q3 2020 earnings highlights
The cannabis company released its third-quarter 2020 earnings on June 11, 2020. The company reported quarterly net revenues of CA$22 million, 70% higher than the revenue for the same period one year ago. The cumulative sales for the first three quarters of 2020 are 67% higher on a year over year basis.
Analysts expected HEXO to post revenue of just over CA$20 million with loss per share of $0.05 in Q3. While HEXO disappointed investors with its bottom-line – its sequential growth of 30% is keeping investors interested.
In the earnings release, HEXO reported a net loss of CA$19 million, resulting in a negative earnings per share of CA$0.07. At the end of April 30, 2020, the company has a weaker cash position, primarily due to negative operating cash outflows.
In the first three quarters of the fiscal year 2020, HEXO raised cash from financing activities by issuing Unsecured Convertible Debentures of $70,000 and common stock valued close to $104,748. The cash balance at the end of the third quarter of the fiscal year 2020 is CA$ 94 million.
What to expect from HEXO in the upcoming quarter?
With a significant market share in the Canadian markets, HEXO plans to become a global player in the growing legal Cannabis sector. In Canada, HEXO claims to have sold over 31,378 kilograms of high-quality legal cannabis products to date.
A consensus of 13 analysts estimates that HEXO could see a sales growth of 66% and forecast an average revenue figure above $78 million in the current year. CEO and Co-founder Sebastian St-Louis recently commented, “Our industry continues to grow during the pandemic, and that’s a testament to the consumer demand for safe and legal products offered by licensed producers.”
St-Louis also hoped that the federal government would extend its support in building better infrastructures for the retail and distribution of legal cannabis products. He also stated that producers and distributors of legal marijuana should find ways to ”compete effectively with the illicit market.”
There are structural issues plaguing several pot producers including HEXO. However, its huge market presence, improving EBITDA, and expanding sales make this pot stock an attractive pick for growth investors.
HEXO: Is This Pot Stock Set to Explode?
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