Hexo Momentum Slows As Q3 Results Are A Big Miss
Investing.com | Jun 22, 2021 05:55AM ET
Shares of Hexo Corp (NYSE:HEXO) (TSX:HEXO) have zigzagged their way steadily downward in the last few days since the cannabis grower unveiled its latest quarterly results.
The stock closed Monday at US$5.76, down about 18.5% from where it was trading at the beginning of last week.
The Canadian-based marijuana company posted third-quarter revenues of C$22.6 million (US$18.26 million), a figure that was 29% below the previous three-month period and a disappointing 35% under analysts’ expectations. Analysts had predicted that Hexo would report C$34.5 million (US$27.87 million) in revenue.
The results miss has had the affect of a spoke being shoved into Hexo’s wheel, as it was gaining momentum in the competitive cannabis market with a series of deals. The Ottawa-based company had earlier this year announced deals that totalled about C$1.3 billion (US$1.05 billion) to take over three cannabis firms—Zenabis Global (OTC:ZBISF) (TSX:ZENA), 48North Cannabis Corp (OTC:NCNNF) (TSXV:NRTH) and Redecan Pharm.
These headline-grabbing deals set the tone for Hexo’s push to expand and propel the company to become one of the leading Canadian cannabis growers with an international reach.
But as a Stifel analyst reportedly said in a note last week, according to a report by BNN Bloomberg, Hexo’s poor third-quarter will shift its momentum somewhat.
Said analyst Andrew Carter:
“While Hexo’s aggressive merger and acquisition activity had the potential to shift focus from any disruption in the company’s momentum particularly in a quarter where results were challenged across the sector, the magnitude of the underperformance drives scrutiny for the core business as well as the ability to realize value from the three acquisitions.”
Two of Hexo’s three deals, however, have not closed yet. And they are not expected to be completed until later this year as they await regulatory approval.
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