HEXO Archives - Green Market Report

StaffStaffMay 24, 2019
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10min720

Although an unconvincing earnings season has clouded the picture, marijuana stocks still enjoy strong fundamental catalysts

By Josh Enomoto, InvestorPlace Contributor May 16, 2019, 1:00 pm EDT

Since their inception, marijuana stocks attracted significant attention. Due to both investment sentiment – and let’s face it, raw emotions – the cannabis sector absolutely skyrocketed. But now, the segment is attracting attention for failing to live up to analysts’ expectations. Is the honeymoon phase over for weed?

Hardly! While cannabis firms have produced some disappointing results during earnings season, that’s no reason to abandon them. For one thing, the resurgent U.S.-China trade war is incredibly favorable for marijuana stocks to buy. Prolonged tensions will almost surely cause us economic damage. An easy fix here is to legalize weed and fully open the door to a multi-billion dollar industry.

Another reason to stay the course with marijuana stocks to buy is the medicinal-cannabis market. Currently, 33 states have legalized medical marijuana, which is indirectly an indictment against the pharmaceutical industry. As I’ve argued many times before, pharmaceuticals must take at least some responsibility for the opioid crisis. This story alone has converted many people who have realized the benefits of all-natural treatments.

Moreover, medical marijuana is becoming a popular and potentially profitable exported good. We all know that progressive Europe is receptive to cannabis-based therapies. But more shocking is that conservative Asian countries notorious for their draconian anti-drug policies have demonstrated tolerance. Thailand became the first Southeast Asian country to legalize medical marijuana, while South Korea is the first East Asian country to jump onboard.

No matter how you look at it, this development strongly benefits the “botanical” industry. Here are the best three marijuana stocks to buy right now:

Aurora Cannabis (ACB)

Aurora Cannabis (NYSE:ACB) recently issued its earnings results for the first quarter of 2019. Let’s just say the print wasn’t exactly great for ACB stock. Although Aurora Cannabis’ net-revenue haul of 65.2 million CAD exceeded the year-ago quarter’s tally by a country mile, it missed analysts’ consensus target of 67.6 million CAD.

Also, a miss was earnings per share. Wall Street expected a loss of 4 cents per share, but Aurora instead delivered a loss of 16 cents. With such a wide gap, conventional wisdom dictates that you should avoid ACB stock.

Actually, though, even if Aurora Cannabis hit its metrics with flying colors, I wouldn’t pay much attention. Why? Because this is a marathon investment toward an unprecedented sector. As such, you’ll find nearer-term noise. Ignore it.

The key here is that the management is positioning itself for dominance in the lucrative medical-marijuana market. Its acquisition of Whistler Medical Marijuana indicates that the focus is on quality, not quantity. When weak marijuana stocks get flushed out, ACB will remain standing.

Canopy Growth (CGC)

Undeniably, a motivating factor to buy shares of Canopy Growth (NYSE:CGC) is the company’s international presence. Primarily, it puts up a strong showing in the European mainland. Currently, Canopy is pushing both westward and eastward in the region. However, the ultimate prize for CGC stock and others is the U.S. market.

Of course, this is seemingly a pipe dream due to our country’s (misguided) Schedule I classification of marijuana. Still, CGC stock jumped mid-April when Canopy announced a contingent offer to buy out Acreage Holdings (OTCMKTS:ACRGF). Canopy will pay $300 million upfront if the U.S. legalizes marijuana.

Many botanical advocates argue that Schedule I is a relic of the ignorant and racist past. However, it’s still federal law, which means cannabis firms in green-friendly states are still technically at risk.

But thanks to the U.S.-China trade war, I genuinely believe that full legalization is nearing reality. A prolonged conflict with the world’s second-biggest economy will invariably hurt our own fiscal health. That’s why the U.S. has to explore marijuana if they insist on playing hardball with China. If so, look for CGC stock to soar.

Hexo (HEXO)

If you’re like most folks who learned about marijuana stocks to buy late in the game, you’re probably hesitant on exposing yourself to the top-tier names. After all, we see them splattered on investment headlines all over the internet. If that’s you, you might want to check out Hexo (NYSE:HEXO).

For starters, Hexo is an understated name. It generates interest, of course, but not nearly as much as the top dogs. I believe that benefits HEXO stock and is partially the reason why shares have steadily made robust gains. Year-to-date, the cannabis firm’s equity is up over 113%.

That said, HEXO stock has much more upside remaining over the long term. Renowned alcoholic beverage-maker Molson Coors Brewing (NYSE:TAP) has a partnership with Hexo to develop cannabidiol (CBD) infused, non-alcoholic drinks.

CBD recently gained mainstream recognition because it offers the cannabis plant’s health benefits but without levering a negative psychoactive effect. In other words, the compound is a perfect gateway for consumers to try other cannabis-based products.

This is a partnership that provides multiple natural synergies. Even though it’s not quite a household name, you should put Hexo on your list of marijuana stocks to buy.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

 


Debra BorchardtDebra BorchardtMarch 14, 2019
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3min3870
HEXO Corp (TSX: HEXONYSE: HEXO) delivered its financial results for the second quarter of the 2019 fiscal year with gross revenue of $16.2 million an increase of 1,269% versus the same time period for last year. Revenues increased by 114% sequentially.
The company reported a net loss for the quarter of $4.3 million, which was a big improvement over last year’s net loss of $8.9 million for the same time period. Sequentially, the net loss decreased 66% quarter over quarter as a result of the increased sales and 16% reduced total operating expenses in the period.
“This quarter not only saw an exponential increase in gross revenue and production, but also saw us continue to execute on our promises including reaching a construction and licensing milestone on our 1,000,000 sq. ft. greenhouse expansion and listing on the NYSE-A,” said HEXO Corp CEO and co-founder, Sebastien St-Louis. “Just yesterday, we announced an agreement to acquire Newstrike Brands Limited. HEXO’s future is very promising, I am looking forward to continually driving shareholder value and achieving milestones with our team.”
Adult Use

The company reported that it produced 4,938 kg of dried cannabis, an increase of 39% over the first quarter of fiscal 2019. It sold 2,689 kg of gram and gram equivalents, an increase of 142% quarter over quarter. The revenue from gross adult-use cannabis in the three months ended January 31, 2019, exceeded total revenues fiscal 2018 by $9,858 or 200%. Oils sales represented 23% of the adult-use revenues. Adult-use sold grams and gram equivalents increased 166% to 2,537 kg from the previous quarter as the company continues to scale up and deliver on its existing supply agreements. Adult-use revenues per gram and gram equivalents increased $0.38 to $5.83 form the first quarter of fiscal 2019.

Medical

Medical revenue per gram and gram equivalent sold increased $0.03 to $9.15 during the quarter, with 152 kg sold.

 

 


Debra BorchardtDebra BorchardtMarch 13, 2019
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4min4030

HEXO Corp. (TSX: HEXO) (NYSE: HEXO) is acquiring  Newstrike Brands Ltd. (TSX-V: HIP) in an all-stock deal valued at approximately $263 million. Newstrike shareholders will receive 0.06332 of a HEXO common share in exchange for each Newstrike common share held. There is a $7.5 million termination fee.

Newstrike is the parent company of Up Cannabis Inc., a licensed producer of cannabis that is licensed to both cultivate and sell cannabis in all acceptable forms. Newstrike, through Up Cannabis and together with select strategic partners, including Canada’s iconic musicians The Tragically Hip, is developing a diverse network of high-quality cannabis brands

“We’re thrilled to welcome the Newstrike team into the HEXO family.  Jay Wilgar, CEO of Newstrike and his team have built incredible relationships, including teaming up with The Tragically Hip, and they share HEXO’s vision of bringing exceptional branded cannabis experiences to adults everywhere,” said Sebastien St-Louis, CEO, and co-founder of HEXO Corp. “With Newstrike, we’re adding talented employees and infrastructure to take HEXO to the next level on our journey to become one of the largest cannabis companies in the world.”

Based on the completion of this acquisition, HEXO estimates that for fiscal 2020 the net and gross revenues from the sale of cannabis in Canada will be in excess of $400 million and $479 million respectively.

“This is the most compelling combination we see in the Canadian cannabis sector.  Our strength in Ontario and English Canada clearly complements HEXO’s strong position in Quebec and creates an industry leader.  The combination will deliver meaningful synergies, a stronger financial position with increased flexibility, and will position the combined company to meet growing consumer demand on a national basis. I believe this transaction is beneficial to our shareholders, customers, and employees. We look forward to working closely with the leadership team to complete this transaction,” added Jay Wilgar, CEO of Newstrike.

According to the company statement, the acquisition highlights include:

  • Capacity boost with state-of-the-art cultivation infrastructure: The Transaction gives HEXO the capacity to produce approximately 150,000 kg of high-quality cannabis annually. The Transaction also provides HEXO access to four cutting-edge production campuses totaling close to 1.8 million sq. ft. of near-term cultivation space and diversified growing and production techniques.  This is in addition to HEXO’s 579,000 sq. ft. facility for a manufacturing and product development center of excellence in Belleville, Ontario.
  • Diversified domestic market penetration: Combined, HEXO, and Newstrike have established distribution agreements in 8 provinces including Ontario, Quebec, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia, and Prince Edward Island, allowing broad consumer access to HEXO’s products across Canada.
  • Premium indoor facility: Newstrike’s licensed indoor facility provides HEXO with access to diversified growing techniques and positions HEXO for flexibility for international exports as global cannabis markets continue to open.
  • Accretive synergies: The combined entity is estimated to realize annual synergies of $10 million, allowing HEXO to operate more efficiently with a commitment to continued excellence.

Video StaffVideo StaffJanuary 18, 2019

3min6810

Green Market Report asks that you sign up as a sponsor on our Patreon page and let’s keep the news alive and unbiased.

Also, Green Market Report released its fourth quarter review on the Cannabis Company Index. Head to the website and read what is one of GMR’s most popular reports.

Ohio began sales of medical marijuana this week. Sales were reported as brisk and lines were long, but the patients said they were happy and supplies held out. Acreage Holdings (CSE: ACRG.U) and Greenleaf Apothecaries both opened dispensaries

New York Governor Cuomo said he hoped to have adult cannabis legalized within 100 days. That doesn’t mean products will be for sale in a few months, it just means legislation could happen. Expect several more months before any retail stores open.

This week, Tilray (TLRY)  signed a $100 million deal with Authentic Brands to provide CBD for any of the company’s product lines. Authentic licenses companies like Nine West and Juicy Couture. This comes just one week after DSW said it was working with Green Growth Brands  to sell its CBD products

MedMen released its unaudited revenue figures for its second fiscal quarter. systemwide revenue increased 40% sequentially to $29.9 million. The company said that if it included pending acquisitions that revenue number would be $49.5 million. Official results will be posted in February.

TILT closed the Jupiter and Blackbird transactions this week. Through Jupiter, TILT has a “bird in the hand” vape hardware business expected to drive roughly $200m in revenues in 2019 as vape demand continues to accelerate. Blackbird brings wholesale distribution capabilities in CA and NV that can be propagated into additional markets as well as leveraged longer term with the company’s Baker CRM to expand TILT’s wholesale footprint.”

Golden Leaf terminated its plan to buy Sweet 16 license.

HEXO Corp. said that its common shares have been approved for listing on the NYSE and will begin trading at the open of markets on January 23. HEXO’s shares will trade on the NYSE American under the ticker symbol “HEXO”, the same symbol the Company’s common shares currently trade under, and will continue to trade under, on the Toronto Stock Exchange.


Debra BorchardtDebra BorchardtDecember 13, 2018
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5min3650

HEXO Corp. (TSX: HEXO) (OTC: HYYDF) reported its financial results for the first quarter of the 2019 fiscal year with gross revenue of  C$6.7 million versus last year’s C$1.1 million for the same time period. The revenue figure includes C$5.2 million from legal adult-use cannabis sales during the first two weeks of legalization.

Still, the company delivered a net loss of C$14.7 million versus last year’s net loss of C$381,000. Hexo said that the increased loss was mainly due to higher expenses needed for expanding the scale of the operations as it prepared for the legalization of the adult-use market and the realization of stock-based compensation expenses in line with the increased headcount and market share price value of the company.

“HEXO hit tremendous milestones in the weeks following the legalization of adult-use cannabis,” said HEXO’s CEO and co-founder Sebastien St-Louis. “The company continues to honor its commitment to executing on its plans, which has led to a significant portion of our first quarter’s $6.7 million in revenue generated in just two weeks and represents more than a 500% increase over last quarter.”

Hexo said that it sold approximately 1,110,000 total gram in the quarter versus 539,000 in total fiscal 2018. Despite the new adult-use market, the company still experienced a 2% increase over last quarter in its medical cannabis sales.

“HEXO’s first quarter financials highlight the remarkable pace of its adult-use cannabis sales and put HEXO on-track to generate significant revenue this year”, added Mr. St-Louis.

Adult Use Sales

Hexo said that its adult-use sales totaled C$5.1 million during the quarter, which is a 371% increase over the C$1.1 million of medical sales in the first quarter of 2018, and a 5% increase over the C$4.9 million of total medical sales in all of fiscal 2018.

The sales volume in the first quarter of 2019 was 952,223 gram equivalents sold. With a limited ability to sell other forms of cannabis, dried flower represented 81% of gram equivalents sold during the period.

The company reported that adult-use revenue per gram was approximately C$5.45. Hexo said that this was reflective of the bulk of sales attributed to dried flower which commands a competitive market sales price. The remaining balance was made up of oil sales which get a higher revenue per gram equivalent.

The company statement said that 90% of all adult-use sales were realized in Quebec through the SQDC with the remaining 10% derived in Ontario and British Columbia via the OCS and BCLDB respectively.

Medical Cannabis Sales

Even though the focus has been on the new adult-use cannabis market, medical sales continue to be an important part of the equation. Revenue increased 30% to C$1.4 million compared to C$1.1 million in the same period last year. Hexo said that the higher revenue was driven by increased sales volume as well as higher Elixir oil sales which get a higher revenue per gram when compared to dried gram sales. Sequentially, revenue increased 2% reflecting a lower revenue per gram on the dried flower sales which decreased $0.22/gram due to the current period’s sales mix of products.

The sales volume for medical cannabis increased 30% to 157,504 gram equivalents, compared to 120,844 in the same prior year period, due to an increase in oil-based products as the product mix purchased by customers shifted towards smoke-free alternatives. Total dried grams sold increased 10% when compared to the same prior year period. Revenue per gram equivalent remained at $9.12 as compared the same prior year period. On a sequential basis, sales volume collectively increased 3% across both dried and oil sales.

Geographical sales in Ontario and Quebec increased 8% and 16% respectively.

 

 


Debra BorchardtDebra BorchardtOctober 26, 2018
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4min7400

HEXO Corporation (HYYDF), formerly known as The Hydropothecary Corp. reported that its revenue increased 14% to $1,410,656 quarter over last year’s $862,000 for the same time period. The net loss was a whopping $10.1 million versus last year’s net income of $935,000 for the same quarter. The net loss per share was five cents versus last year’s net loss of one cent for the same quarter.

“The past quarter has signified many milestones for HEXO Corp as we moved towards final preparations for the adult-use cannabis market. With two additional supply deals, this time in Ontario and in British Columbia, the establishment of a joint venture with Molson Coors Canada to develop cannabis-infused non-alcoholic beverages, a first step towards going global, and more, I’m extremely proud of the speed at which we continue to execute on our strategic priorities,” said Sebastien St-Louis, HEXO’s CEO and co-founder.

For the fiscal year ending July 31, 2018, revenue increased 20% to $4.9 million compared to $4.0 million for fiscal 2017. Sales volume increased 33% to 538,886 gram equivalents, compared to 404,158 in the same prior year period.

Raw Costs Declining

HEXO said that the weighted average cash cost of dried inventory sold per gram declined 60% year over year to $0.90 for the fourth quarter versus last year’s $2.23 for the same time period.  The company said that the cost per grams sold had been trending downward cumulatively as a result of improvements in the cultivation processes and economies of scale resulting from the full utilization of a higher production capacity.

The company also reported that the weighted average cash cost of dried inventory sold slightly increased to $0.90 from $0.88 as compared to the 3 months quarter ended April 30, 2018. This trend is expected to continue in the short-term, as it moves towards full efficiencies of scale and utilization of the new facilities as well as begins increased levels of production to meet the demand of the adult recreational market.

Expenses Increase

Expenses increased to $4.3 million in the fourth quarter, compared to $1.2 million for fiscal 2017’s fourth quarter. HEXO attributed the increase to the general growing scale of our operations, including an increase in general, finance and administrative staffing and additional rental space. Consulting and professional fees increased by $1.7 million and $207,000 respectively, reflective of the increased financial reporting and control based regulatory requirements accompanying public status on the TSX-V and subsequently the TSX as well as increased compliance costs as a publicly listed company.

For the twelve months ended July 31, 2018, general and administrative expenses increased to $9,374 compared to $3,609 for the same period in Fiscal 2017. The increase is consistent with the explanation as stated above.

On a positive note, cash and short-term investments were $244.8 million and the balance sheet remained debt-free



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