There is no doubt that HEXO stock has been facing troubles so much so that it remains at the risk of getting delisted, having lost over 70.2% of its value year-to-date. In hopes of recovery, HEXO Corp (TSX:HEXO) (NYSE:HEXO) announced a new deal with Molson Coors last week.
Will The Deal Help Company Revive
The joint venture between the two companies, known as Truss CBD USA, would have his focus on non-alcoholic CBD beverages derived from hemp. Truss Beverages, their already existing joint venture, has been successful in making its mark in the markets of Canada and would launch in the latter part of this year the CBD-based beverages. This could prove to be highly profitable, given the high demand for cannabis 2.0 products. Over 31% of the consumers of cannabis in Canada appear to be interested in CBD-infused beverages, as per a research paper of Deloitte.
In the US, the demand is as high for cannabis edibles and other products. However, the FDA is yet to approve CBD infused edibles and beverages, which means that cannabis companies might have to struggle to launch their products in the USA. Hexo has plans to carry out all of its production and distribution for Truss CBD USA in Colorado – which already has established regulations for CBD use in foods and beverages. This might make it easier for the company to launch its products.
Hexo has not been able to live up to the analyst’s expectations, missing the estimates for the past few quarters. The company has further failed to deliver positive EBITDA, reporting EBITDA loss of C$10.3 million for fiscal 2020 Q2. This has led to analysts lowering their revenue estimates of the company to C$75 million for the year. The losses are expected to be C$49 million for fiscal 2020. In the opinion of many analysts, Hexo doesn’t seem promising.