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Hexo Continues To Struggle On Road To Profitability

Published 03/23/2021, 07:00 AM
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Shares of Hexo Corp (NYSE:HEXO) (TSX:HEXO) continued to trade down early this week after the cannabis grower unveiled its latest earnings result last week that showed an almost $21-million loss on revenues that nearly doubled the previous quarter.

Hexo Daily

The latest loss added another quarter the Canadian-based cannabis grower’s list of negative reporting periods. But it was far better than the same three-month period in the previous year, when the Hexo recorded a $298.2-million loss.

On the positive side were revenues. Hexo’s net revenues for the second quarter clocked in at about $32.9 million, almost double the $17 million achieved in the same quarter in the previous year. Yet, investors were not moved to endorse what they saw. Shares of Hexo lost almost 14% the next day, dropping below the level before the latest results were made public.

Canadian analysts only slightly adjusted their price target on Hexo, including CIBC which lowered its target to C$13 from C$13.50. Shares of Hexo yesterday closed at C$8.88 or US$7.06 for U.S.-traded stock.

The latest earnings news comes about a month after Hexo announced a $235-million deal to buy Zenabis Global (OTC:ZBISF) (TSX:ZENA), a small Vancouver-based recreational and medical cannabis supplier that is traded on both the Toronto Stock Exchange and the OTC Markets in the U.S. The purchase was a strategic move to provide Hexo with an entry into the European market, as well as bolster its holdings in Canada.

Trulieve Deal: Part Of Company’s Small, But Steady Expansion

Shares of Florida-based Trulieve Cannabis (OTC:TCNNF) continue on their steady march upward while the company progresses with its expansion outward.

TCNNF Daily

The company on Monday announced it will acquire Mountaineer Holding LLC in a cash-and-stock deal that will give Trulieve an entry into the West Virginia market, a new medical marijuana state, as well as a cultivation and processing plant in Massachusetts.

Valued at only $6 million, the deal is far from the multi-billion-dollar consolidations that cannabis sector has become known for, but it is in keeping with Trulieve’s steady inch-it-along approach to growing its business. The result has contributed to Trulieve emerging as a solid powerhouse performer.

Its stock yesterday closed at $49.77, down 1.29% on the day. In the past year, however, it has gained a whopping 670%.

The latest deal gives Trulieve facilities and licensing in Massachusetts and West Virginia, adding to its existing operations across Florida, California, Connecticut and Pennsylvania.

“West Virginia just became a lot more interesting with the addition of a cultivation permit asset to our processor and dispensary application wins,” said Trulieve CEO Kim Rivers.

CBD Market Expands

The CBD market keeps getting bigger, and gaining a loyal consumer base.

According to the latest figures released by New Frontier Data, an independent analytics firm specializing in the global cannabis industry, consumer spending on CBD, a cannabidiol derived from cannabis and hemp, reached $3.8 billion in 2020.

The substance is gaining acceptance by consumers to help alleviate a long list of conditions, from anxiety to inflammation.

According to New Frontier, 41% of Americans CBD consumers surveyed use it primarily for pain, while 33% use it to lessen anxiety. The survey showed that just over half of Americans surveyed reported having a friend or family member who regularly consume CBD.

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