Why Hexo Stock Has Climbed 14% So Far in 2021

© Provided by The Motley Fool Why Hexo Stock Has Climbed 14% So Far in 2021

What happened

Canadian cannabis company Hexo (NYSE: HEXO), which began 2021 at $3.72 a share, closed at $4.20 on Monday after going as high as $10.28 in February. So far this year, the stock is up more than 14%. Some of that is due to the general excitement surrounding cannabis stocks as several states opened to medical or adult-use sales.

The up-and-down nature of Hexo’s ride also has a lot to do with the company’s spate of acquisitions and mixed financial reports. 

So what

Investors got excited when the cannabis stock announced its plans to buy Zenabis Global in February for $186 million. That was just the beginning of a buying spree for the company. It bought 48North Cannabis (OTC: NCNNF) in May in an all-stock deal for $41 million. Then, later in May, it announced it was purchasing Redecan, Canada’s largest privately owned producer of recreational marijuana, for $765 million.

The company had a solid second-quarter report that kept its shares above $8. It reported revenue of 32.8 million in Canadian dollars ($26 million), up from CA$29.4 million in the first quarter, due to growth in non-beverage adult-use cannabis sales and in cannabis beverage sales. Net losses for the quarter were reported as CA$20 million, a big improvement over the CA$298 million in the same period in 2020.

The stock cooled considerably, however, in June when the company released its third-quarter report. It reported revenue of CA$22.6 million, down from CA$32.8 million sequentially. Hexo did trim net losses from CA$20.8 million to CA$20.7 million sequentially, but the losses were still higher than the same period in 2020, when the company lost CA$19.5 million.

The biggest concern coming out of the third-quarter report was the company’s mention of its various supply issues. 

Now what

The company needs to show it can pay for all these acquisitions by improving its revenue in the fourth quarter. Hexo just established its presence in the United States by buying a 50,000-square-foot production facility in Fort Collins, Colorado. It says the facility will allow it to grow its joint venture with Molson Coors Brewing (NYSE: TAP) for its Truss brand of CBD-infused beverages and other products.

Investors will also look for Hexo to begin to pay down its debt of CA$73.9 million.

SPONSORED:

Here’s The Marijuana Stock You’ve Been Waiting ForA little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

And make no mistake – it is coming.

Cannabis legalization is sweeping over North America – 15 states plus Washington, D.C., have all legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018.

And one under-the-radar Canadian company is poised to explode from this coming marijuana revolution.

Because a game-changing deal just went down between the Ontario government and this powerhouse company…and you need to hear this story today if you have even considered investing in pot stocks.

Simply click here to get the full story now.

Learn more

Jim Halley has no position in any of the stocks mentioned. The Motley Fool recommends HEXO Corp. The Motley Fool has a disclosure policy.