Is HEXO Stock A Solid Buy After The Recent Earnings

Cannabis companies have had a pretty tough time over the course of the past year or so, and in that regard, HEXO Corp (TSX:HEXO) (NYSE:HEXO) was not an exception. The stock struggled considerably, but over the course of the past weeks, it has bounced back strongly. Over the course of the past week, the stock has gained as much as 26%, and the biggest trigger was the announcement of the company’s third fiscal quarter results.

Earnings Review

The company’s revenues rose by as much as 30% sequentially and hit $22.1 million. On top of that, the EBITDA loss came in at $4.3 million, which was significantly lower than the loss of $8.5 million in the previous quarter.

It should also be noted that the net loss rose from $0.04 per share in the previous quarter to $0.07 in the third quarter. Analysts had estimated losses of $0.05 a share. The company stated that it managed to surpass expectations on the revenue front due to the higher the expected sales of its new offering Original Stash.

Hexo had introduced the brand in order to fight against the black market, and the product managed to garner impressive sales. On top of that, the oil extract products and new hash products launched by Hexo also contribute well to the third quarter revenues.

However, that is not all. The company has another important product in the pipeline that could further boost its revenues. Hexo is looking to use its partnership with beverage company Molson Coors to launch a hemp-based beverage product and expand into a potentially lucrative market. The company wants to achieve a positive adjusted EBITDA by the first half of 2021, and much of that will be fuelled by the growth of the retail cannabis market in Canada.

If the company does manage to hit profitability over the next few quarters, it will be a major achievement and could further propel the stock. Moreover, it should also be noted that at this point, the stock is trading at a price to sales ratio of 7.

About Travis Garlick 1791 Articles
Been writing about and trading stocks since 2013. Manage a group of micro-cap investors on Facebook with over 15,000 members. Turned $8,500 into 185k the first year I started trading stocks and haven't looked back.