HEXO Inventory Leads Marijuana Shares in 2021
This yr has had no scarcity of massive marijuana-stock tales. Mergers, political maneuvering, legalization pushes—it has been something however boring for pot shares this yr.
However marijuana inventory traders ought to by no means lose sight of which inventory holds the best potential for good points. In my thoughts, the pot inventory that traders ought to be looking out for proper now could be HEXO Corp (NYSE:HEXO).
HEXO inventory has soared by greater than 250% previously 12 months.
For long-time readers of mine, that ought to come as no shock. I’ve been bullish on HEXO inventory for years. I’ve lengthy considered it as a possible chief in the way forward for the marijuana trade as a result of firm’s partnership with alcohol producer Molson Coors Beverage Co (NYSE:TAP).
The 2 corporations struck their deal simply when cannabis-infused drinks have been thought of to be one of the crucial thrilling prospects within the marijuana market.
What’s extra, HEXO Corp has a robust place in Quebec, which is Canada’s second-most populous province.
The pot inventory’s momentum hasn’t slowed in 2021, both. The corporate has seen its share worth almost double within the first 5 months of 2021.
Chart courtesy of StockCharts.com
So what’s powering the large good points we’ve been seeing from HEXO inventory?
First, the corporate has reported some stable financials.
“I’m so happy with the whole HEXO workforce for the position they performed in serving to us obtain optimistic adjusted [earnings before interest, taxes, depreciation, and amortization (EBITDA)] this quarter, together with our seventh consecutive quarter of adjusted EBITDA enchancment,” mentioned the corporate’s CEO and co-founder, Sebastien St-Louis. (Supply: “HEXO Corp Announces Positive Adjusted EBITDA and 94% Increase in Net Revenue From Prior Year,” GlobeNewswire, March 18, 2021.)
Our continued concentrate on delighting customers has seen us enhance our market share throughout Canada whereas sustaining the primary place in Quebec. We’re additionally very excited to have launched ‘powered by HEXO’ [cannabidiol] drinks in Colorado. Our internet revenues and gross margin have continued to enhance yr over yr, bolstered by our premium product combine with the relaunch of UP Hashish.
HEXO Corp’s complete internet income elevated to CA$32.8 million, up 94% in comparison with the identical interval a yr earlier than and up 12% from the earlier quarter.
The corporate’s non-beverage leisure marijuana income additionally skyrocketed, up 72% in comparison with a yr prior and up 10.5% from the earlier quarter.
Furthermore, HEXO has CA$2.9 million in operational money, which is an effective signal for a rising pot firm.
All these figures are consultant of HEXO Corp’s sturdy place within the Quebec market (presently No. 1, with few actual opponents difficult that place) and its rising operations in the remainder of Canada, comprising 49% of the corporate’s gross sales composition.
So the numbers look good, however that’s not the one motive HEXO inventory has been thriving.
Initially of the COVID-19 pandemic, many traders retreated into safe-haven investments. They feared an upcoming market crash because the world’s financial system slowed in some locations and outright skilled shutdowns in others.
However that crash by no means occurred. Fairly the alternative. Shares throughout the board (particularly tech shares) noticed large good points even because the world suffered by a once-in-a-century pandemic that considerably altered the best way we dwell and triggered unemployment to erupt.
However one phase of the inventory market that was harm was rising markets. In spite of everything, why would an investor have interaction in sometimes unstable markets throughout a time of utmost negativity?
That was the considering, at the least. After all, that considering proved to be defective.
As I’ve identified many occasions, vice items (which marijuana is) normally see their gross sales go up in occasions of strife and financial uncertainty. A drink or smoke might help take the sting off, as they are saying, and there’s been no sharper edge in residing reminiscence than the worldwide pandemic and government-enforced lockdowns across the globe.
Buyers ultimately calmed down when the market didn’t crash and we received used to the brand new regular, as they name it, whereas marijuana gross sales truly started to extend in Canada whereas legalization unfold to some main U.S. states like New York.
This culminated in large good points for a lot of pot shares.
HEXO inventory was in a very sturdy place as a result of it’s a marijuana penny inventory.
Seeing as how penny shares are thought of to be among the many most susceptible securities, and nascent industries are identified for volatility, that leads marijuana penny shares to be perceived as doubly unstable—and subsequently doubly harmful—throughout intense financial uncertainty.
Contemplating that HEXO inventory had already been on a decline since mid-2019, coupled with its penny-stock standing, it skilled one other important loss in worth in February/March 2020, coinciding with the start of the pandemic.
In sum, the market over-corrected HEXO inventory’s worth, which in flip set it up for the huge good points we’ve seen in latest months as traders realized how a lot potential there may be in HEXO.
Does HEXO inventory nonetheless have room to develop? For my part, completely. HEXO was, at one level, across the $30.00-per-share mark. Now it’s across the $7.50 stage, leaving it a number of room to rise.
The marijuana inventory market is as soon as once more heating up, and we’re seeing many corporations that I used to be bullish on previously coming again to the fore.
And that brings me again to HEXO Corp and its potential for enormous share-price progress within the subsequent few months.
Whereas it has definitely already seen explosive good points previously yr, which can lead some traders to imagine that it’s too late, HEXO inventory isn’t even near its all-time excessive—a stage I imagine it may attain once more throughout the subsequent 12 months or so.
Meaning triple-digit good points are definitely potential for HEXO shares, making them a really attractive prospect for traders.