|Bid||0.00 x 21500|
|Ask||0.00 x 2900|
|Day's Range||5.51 - 5.84|
|52 Week Range||4.91 - 8.40|
|Beta (3Y Monthly)||N/A|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
Cannabis stock traded broadly lower Friday, putting the sector on track for a fourth-straight loss, as Hexo Corp. shares extended losses toward a 3-month low in the wake of disappointing quarterly results. The ETFMG Alternative Harvest ETF dropped 2.1%, as 31 of 38 components sold off, and the Horizons U.S. Marijuana Index ETF shed 3.2%. The ETFMG ETF has now lost 5.2% over the past four sessions. Among the sector's more-active components, shares of Hexo Corp. dropped 4.1%, after losing 8.8% on Thursday, to put them on track for the lowest close since March 12. Elsewhere, shares of Aurora Cannabis Inc. inched up 0.1%, after losing 4.7% over the past three days; Cronos Group Inc. dropped 5.7%; Aphria Inc. shed 2.0%; and Canopy Growth Corp. declined 2.0%. The ETFMG ETF has now shed 15% over the past three months while the S&P 500 has gained 2.7%.
Jefferies analyst Owen Bennett is not a fan of Hexo (HEXO), and for the time being at least, his antipathy is proving well-founded.On Wednesday after close of trading, Canadian marijuana stock Hexo reported its fiscal Q3 earnings results. "Earnings" per se weren't horrible. The stock reported a $0.04 per share loss, which while not great, was at least better than the $0.05 per share that most analysts had expected it would report. Rather than earnings, Bennett's problem with Hexo is the company's sales -- and the negative trend those sales are starting to exhibit.Hexo, you see, has publicly declared its intention of growing sales from about $4 million last year, to about C$400 million next year. Problem is, while sales did in fact grow strongly in Q3 2019 relative to Q3 2018 numbers, they didn't grow as strongly as Wall Street had hoped they would -- and in fact, sales declined sequentially from Q2 to Q3."Hexo's Q3 net revenue came in below estimates at C$13.0m," noted Bennett, versus the consensus number of C$14.7 million. Arguably worse, Q3 sales came in $400,000 below the C$13.4 million Hexo booked in Q2 -- the opposite of what Hexo had predicted going into earnings. This was despite Hexo growing both the volume of marijuana it produced, and sold, in Q3 relative to Q2.Why? According to Hexo's report, the price of both marijuana grown for recreational consumption, and also medical marijuana prices (expressed in C$ per gram) declined quarter-over-quarter -- by 9% and just under 1%, respectively. The company's "average gross selling price" also declined by 9%, to C$5.48 per gram.Nor does this appear to be a one-time letdown. To the contrary, Bennett quoted management warning of "significant pricing compression" over the next 24 months. This will have a negative effect not just on sales, but on the profit margins Hexo earns on those sales as well. Instead of the 53% gross profit margin that analysts had expected Hexo to earn in Q3, the company grossed just 50%. And now, Hexo management says its "gross margins for flower" could fall to as little as 40% over the next two years.Additional risks highlighted by Bennett include: potential delays by Health Canada in giving guidance on the marketing of "derivative" (i.e. non dried flower) cannabis products, potential delays in Hexo's construction of its Belleville processing site (designed to process 375,000 tons of marijuana per year), the possibility that "muted" sales will result in an oversupply of marijuana in Quebec, and the likelihood that such an oversupply will further depress prices -- perhaps hurting margins even worse than management is already warning about.None of this, it bears mentioning, bodes particularly well for Hexo's stated intention of growing its marijuana sales to C$400 million by 2020. And that, in a nutshell, is why Bennett is maintaining his "underperform" rating on Hexo stock, and his price target of C$7.70.To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.Read more on HEXO: * Should HEXO stock Be Bought on Weakness? * Analyst Puts the “Hex” on Hexo Stock Ahead of Earnings * Cannabis Stock Hexo Can Go a Bit Higher Here, but Caution Is Warranted * The Cannabis ‘Magic Bus’ Is About to Leave the Station! Next Stops? Hexo More recent articles from Smarter Analyst: * Village Farms (VFF) Has a Lot Going for It * Square (SQ) Growth Slowing, But Evercore Remains Bullish on the Stock * This Analyst Sticks with His Buy Rating on Aphria (APHA) Stock, But Trims Price Target * Cannabis Stock Village Farms (VFF) Has a Lot Going for It
Hexo Corp. shares fell sharply in Thursday trading after the company announced a sequential decline in revenue as part of its third-quarter earnings just months following recreational legalization of marijuana in Canada.
Hexo said cannabis sales for the fiscal third quarter fell vs. the prior quarter. Hexo stock sold off. Other marijuana stocks also retreated.
HEXO (HEXO) is trading down big after putting up a quarter where net revenues declined from the previous quarter. The company is still in the transition phase from ramping up cultivation capacity to getting the product on market.The cannabis company remains on track for a big breakout year in FY20 so any stock weakness following FQ3’19 results is likely a buying opportunity. The stock market has moved to the phase of where investors want to see a big jump in actual cannabis results and HEXO won’t start providing those numbers for another quarter or two.Focus On CatalystsHEXO reported that net revenues decreased to C$13.0 million for the period ending April 30 from C$13.4 million in the January quarter. The big key to the revenue dip was the drop in the average gross selling price for adult-use dried grams to C$5.29 from C$5.83.The roughly 9% dip in selling prices made a huge impact because HEXO is still in the process of ramping up cannabis production. The company only sold a fraction more dried cannabis equivalents in the quarter, but the production levels nearly doubled to 9,804 kg. The time to market will always cause harvests to show up in sales for the following quarter.With the completion of the Newstrike Brands deal on May 24, HEXO is now on pace for 150.000 kg of annual production. The company still needs to grow quarterly production by another 270% in order to reach full capacity.The company only sold 2,904 kg of cannabis equivalents in the quarter leaving a greater than 10-fold increase in sales within the next year or so. HEXO just completing their first harvest in their expanded 1 million sq. ft. facility.The only major negative with the quarter and the current plan is that the company has a weak medical cannabis business. The quarter continued to see flat kg sold in the 150 range despite stable average selling prices of over C$9 per gram.HEXO saw a substantial boost in operating expenses going from C$4.6 million last April to C15.9 million this quarter. The end result was an adjusted operating loss in the C$10.0 million range. The C$10.0 million synergies from the Newstrike Brands acquisition combined with improved efficiencies should get the company back into the black.Big Target The Canadian cannabis company continues to forecast a FY20 revenue target of C$400 million or about $300 million. A big part of the plan is to use the Newstrike Brands business along with a hemp supply agreement for 200,000 kg of hemp to sell CBD products such as edibles in Canada and other products in eight U.S. states in 2020.HEXO recently hired the past CFO of Nutrisystem to focus on the U.S. based financials showing the importance of the U.S. market to future growth.The two-pronged growth path and the move to get away from pure farming via the hemp supply agreements should improve margins next year. The company will grow quarterly net revenues from slightly above C$10 million to around C$100 million per quarter in the matter of a few months from now with the next fiscal year starting on August 1.TakeawayThe key investor takeaway is that HEXO remains on track for a huge year in FY20. The market is likely underwhelmed by the FQ3’19 revenue dip, but the investors paying attention will see the opportunity to own the stock on any weakness.After the current quarter that ends in July, HEXO is lined up to generate sequential revenue gains in excess of C$20 million. With a market value close to $1.5 billion, the stock should find support in the $6 range.To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here. Read more on HEXO: * Analyst Puts the “Hex” on Hexo Stock Ahead of Earnings * Cannabis Stock Hexo Can Go a Bit Higher Here, but Caution Is Warranted * The Cannabis ‘Magic Bus’ Is About to Leave the Station! Next Stops? Hexo * Cannabis Stock Hexo: The Cheapest Way to Invest in a Giant Market for Marijuana? More recent articles from Smarter Analyst: * Village Farms (VFF) Has a Lot Going for It * Hexo Has Difficult Days Ahead, Analyst Says * Square (SQ) Growth Slowing, But Evercore Remains Bullish on the Stock * This Analyst Sticks with His Buy Rating on Aphria (APHA) Stock, But Trims Price Target
announced Thursday it received a medical cannabis license in Greece but the stock was falling following after the company posted quarterly revenue below analysts' forecasts. The company said the license, issued by the Greek government, allows the company to establish cultivation, processing and manufacturing facilities in the Thessaly region of the country, poising the company to become the leader in the European cannabis landscape. "This is a major step for Hexo as we continue to execute towards becoming a top three global cannabis company," said CEO Sebastien St-Louis.
Consumer packaged goods cannabis company Hexo Corp (NYSE: HEXO ) reported Wednesday evening fiscal third-quarter results , which one analyst described as "OK" as the company continues to build ...
The Canadian cannabis producer delivered sizzling year-over-year revenue growth in its third quarter thanks to adult-use sales. However, its limited production capacity remained an issue.
The U.S.-listed shares of Hexo Corp. slipped 0.5% in premarket trade Thursday, after the Canada-based consumer packaged goods cannabis company reported narrower than expected fiscal third-quarter loss but net revenue that came up short. The net loss for the quarter to April 30 was C$7.75 million ($5.82 million), or 4 cents a share, after a loss of C$1.97 million, or 1 cent a share, in the year-ago period. The FactSet consensus was for a loss of 5 cents. Net revenue jumped to C$13.02 million from C$1.24 million, below the FactSet net sales consensus of C$14.8 million. Average gross selling price of adult-use dried gram and gram equivalents was C$5.29 as of April 30, down from C$5.83 at the end of January, while kilograms sold of adult use grew to 2,759 from 2,537. Average gross selling price of medical dried gram and gram equivalents slipped to C$9.11 from C$9.15 while kilograms sold declined to 145 from 152. Separately, Hexo said its affiliate Hexo Med S.A. affiliate has received a medical cannabis installation licence from the Greek government which allows Hexo to establish cultivation, processing and manufacturing facilities in Greece. Hexo's stock has rocketed 88% year to date through Wednesday, while the ETFMG Alternative Harvest ETF has climbed 30% and the S&P 500 has gained 15%.
NYSE-A: HEXO) is pleased to announce that its affiliate, HEXO MED S.A. (“HEXO MED”) has received a medical cannabis installation license. The license, issued by the Greek government, will allow HEXO MED to establish cultivation, processing and manufacturing facilities in the region of Thessaly, Greece. With HEXO Corp’s experience in the industry, HEXO MED is poised to become a leader in the European cannabis landscape.
Key highlights of third quarter of 2019 fiscal year HEXO remains on-track ramping up to $400 million net revenue in fiscal 2020 and to double net revenue in Q4 fiscal.
Just a few hours from now, Canadian cannabis company Hexo Corp (HEXO) will report its fiscal Q3 2019 earnings, but not everyone's willing to wait to hear the bad news. For example, Seaport analyst Brett Hundley went ahead and cut its price target on Hexo stock -- by nearly half.That's right. In a note reiterating his "buy" rating on Hexo, Hundley cut his price target from $13 to just $8. On the plus side, at least he's saying eight US dollars, and not their cheaper Canadian variant. But even so, Hexo's new target cuts close to the $6.64 a share that Hexo costs today. (To watch Hundley's track record, click here) So what is it about Hexo that has Hundley souring on the stock?Overemphasis on cannabis Hexo's products include dried cannabis flower, cannabis oil, and cannabis powder. But while this emphasis on cannabis may seem natural in a Canadian cannabis company, Hundley worries that Hexo may have made a bad bet in ignoring the virtues of hemp. In the analyst's view, major consumer packaged goods companies ("Big CPG") and pharmaceutical companies ("Big Pharma") "have increasingly turned their attention away from marijuana towards hemp and biosynthesis."Pivoting to address this quirk in its potential partners, Hexo recently established a US subsidiary (HEXO USA) that will focus on developing "a presence in hemp-derived" cannabidiol, and has named a US-based chief financial officer to boot. Hundley hopes that these moves may help Hexo to win additional partnerships with Big CPG and Big Pharma firms, and the analyst says he still holds Hexo in "high regard," and remains "positive on HEXO's strategic plan to become a value-added ingredients supplier to the CPG and pharma sets."Nevertheless, Hundley is "disappointed in the company's [in]ability to attract additional strategic partners to its hub and spoke model" to date -- and as a result, believes his previous hopes for the company's sales and earnings may turn out to be "too aggressive with assumptions around production, gross margin, and SG&A expense."(Canadian) dollars and centsPutting numbers to his fears, Hundley roughly tripled his estimate of the amount of money Hexo will lose this year, to an earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of C$33.5 million. Then, looking ahead to fiscal 2020, the analyst began cutting estimates. Next fiscal year, Hundley sees sales coming in 11% lighter than previously projected -- C$406 million. He cut his EBITDA projection for Hexo's FY2020 even more deeply, from more than C$133 million previously, to barely C$33 million today.Proceeding down the timeline, Hundley then reduced his estimate for fiscal 2021 sales by 5%, to C$611 million, and said FY2021 EBITDA should be C$128 million -- 36% less than the C $201 million previously posited. (Mercifully, 2021 seems to be about as far out as Hundley is forecasting).So where does all this leave investors? According to Hundley's estimates, Hexo now sells for about 27 times current year sales -- which seems like a pretty steep price to pay. Granted, even after the estimate cuts, Hexo's current market capitalization is only about 4.6 times the sales the analyst expects Hexo to rake in next year.Then again, the more those sales estimates fall, the more expensive Hexo stock looks.To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here. Read more on HEXO: * Cannabis Stock Hexo Can Go a Bit Higher Here, but Caution Is Warranted * The Cannabis ‘Magic Bus’ Is About to Leave the Station! Next Stops? Hexo * Hexo: The Cheapest Way to Invest in a Giant Market for Marijuana? * The Catalysts That Will Send Cannabis Stock HEXO to New Highs More recent articles from Smarter Analyst: * Village Farms (VFF) Has a Lot Going for It * Hexo Has Difficult Days Ahead, Analyst Says * Square (SQ) Growth Slowing, But Evercore Remains Bullish on the Stock * This Analyst Sticks with His Buy Rating on Aphria (APHA) Stock, But Trims Price Target
While earnings season is all but over for most stocks, for the cannabis business, it's only beginning. On June 20, Canopy Growth (NYSE:CGC) will kick off a spate of quarterly reports from the industry, forcing owners of CGC to serve as proverbial guinea pigs.Source: Shutterstock "Because it's the biggest, there'll be a follow-the-leader type action, so a strong result will lift all boats," explained Korey Bauer, the portfolio manager of the Cannabis Growth Fund (CANNX). He went on to say: "Investors will be looking closely at price and margins as everyone adjusts their numbers based on what the big companies are doing." * 7 Dark Horse Stocks Winning the Race in 2019 Marijuana mania is still alive and well, and the owners of marijuana stocks are capable of putting a positive spin on clearly disappointing news. But as the realities of legalized cannabis, both good and bad, set in, investors are slowly but surely beginning to treat these organizations like companies that will sooner or later have to turn a profit.InvestorPlace - Stock Market News, Stock Advice & Trading TipsHowever, the top and bottom lines are arguably the least important data nuggets for the owners of CGC stock. Other metrics are going to be much more telling indicators of how healthy Canopy Growth is becoming. Canopy Growth's Earnings OutlookThe initial and overarching response to next week's Q4 and full-year results, of course, will be driven by the company's sales and income levels.As of the latest look, analysts are, on average, calling for revenue of $90.9 million (in Canadian dollars), up from the year-ago figure of $22.8 million. As far as earnings, analysts, on average, believe Canopy Growth is on pace to report a loss of 23 cents per share of CGC stock, narrowing the year-ago operating loss of 31 cents per share.The heroic growth is entirely due to timing.Canada legalized marijuana for recreational use in October of last year, jump-starting strong sales for several organizations that had long been prepping for that day. As a result, the year-over-year revenue jumps will look artificially impressive until after October 2019.That said, sequential progress still counts. Canopy Growth generated sales of $83 million in Q3, with the bulk of the 256% boost coming from surging sales of recreational cannabis, which now makes up more than two-thirds of the company's revenue. Canopy Growth lost 22 cents per share in Q3. 3 Things to WatchWhile a large number of investors will certainly be eyeing CGC's sales and profits, most of the so-called smart money will be looking at the less-touted data that may more directly foreshadow the company's future. Three numbers will mean more than any others.1.Average Selling PriceSince Q3 was Canopy Growth's first as a seller of recreational marijuana, the year-over-year comparison won't be too telling. But the company was able to sell recreational marijuana at a price of $6.96 per gram.To its credit, per-gram prices for its medicinal cannabis were up year-over-year. With marketwide prices still falling as cannabis becomes more commoditized, however, price matters.2.Production CapacityIn Q3, Canopy Growth had access to 5.6 million square feet worth of growing capacity. Full use of that square footage could translate into output of more than 500,000 kilograms of cannabis per year. That would make CGC Canada's second-biggest grower,Investors may want to listen carefully to any updates on or changes to that number.3.Operating ExpensesFinally, while investors have yet to balk at CGC's spending, the slow realization that cannabis is a commodity has at least put some focus on its spending habits. During the upcoming earnings report, the owners of CGC stock could question, for the first time, whether all of the company's operating expenditures are absolutely "worth it."On that note, while revenue nearly quadrupled in Q3, sales and marketing expenses more than quadrupled, while general and administrative spending soared 400%.There's still a chance Canopy can cost-effectively scale up, but it certainly hasn't yet. Its operating expenses don't include the cost of acquisitions. Other Upcoming Cannabis ReportsThough Canopy Growth has some major news coming up, the owners of CGC stock aren't the only investors on pins and needles. Hexo (NYSEAMERICAN:HEXO) is also expected to post its quarterly numbers later this month.Some time will pass before the next big cannabis earnings report, though. Aphria (NYSE:APHA) could post its results sometime in July, as could OrganiGram Holdings (NASDAQ:OGI), given the timing of its previous quarterly reports. The same criteria increasingly being used to judge Canopy Growth will also be used to judge other cannabis companiesAs of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Dark Horse Stocks Winning the Race in 2019 * 6 Chinese Stocks to Sell That Are Suffering From a Digital Ad Slowdown * 4 Technology Stocks Blasting Higher Compare Brokers The post 3 Things to Scrutinize in Canopy Growth's Earnings Report appeared first on InvestorPlace.
GATINEAU, Quebec, June 10, 2019 -- HEXO Corp (“HEXO” or the “Company”) (TSX: HEXO; NYSE-A: HEXO) will release its financial results for the third quarter fiscal 2019 ended.
Though the bulk of cannabis stock-mania to date has focused on Canopy Growth (NYSE:CGC), Tilray (NASDAQ:TLRY), Aurora Cannabis (NYSE:ACB) and Cronos Group (NASDAQ:CRON),arguably the most compelling pick in the bunch, Hexo (NYSEAMERICAN:HEXO), has been habitually overlooked.That's changing though, and for good reason. As marijuana-stock mania continues to mature and investors are willing and able to start judging these companies on their individual merits, they're finding HEXO is about as well-positioned for growth as any other name in the business. Although the Hexo stock price feels frothy now, this quiet name may be one of the better options for newcomers looking for exposure to marijuana stocks. * 7 Stocks to Buy As They Hit 52-Week Lows Bank of America's Christopher Carey agrees.InvestorPlace - Stock Market News, Stock Advice & Trading Tips What Makes HEXO Different?At first glance, it's easy to assume all marijuana stocks are the same.Take a closer look, though, and it becomes clear they're not. Aurora, for instance, has made it clear it's first and foremost hoping to make a meaningful shift into the medicinal market, and is steering clear of beverages. Canopy Growth has mastered its appeal to recreational users. Each name in the business, in fact, is now cultivating one or more niche.So what makes HEXO different? A couple of things.One of them, oddly enough, is geography.Though recreational cannabis is now legal everywhere in Canada, one of the proverbial epicenters of the movement has been Quebec, where HEXO sells roughly one-third of all cannabis bought. Its long-term supply contract should keep it positioned as the market leader there for the foreseeable future.The overarching difference between HEXO and its peers, however, is its plans to penetrate the still-budding edibles and beverage market, in the U.S. and Canada, along with its giant partner and its history of innovation.It's a tricky and unproven arena, one of the reasons Aurora Cannabis has no current plans to produce a beverage line. But HEXO will have plenty of competition in that market. Constellation Brands (NYSE:STZ) and Canopy Growth are teaming up on beverages, and New Age Beverages (NASDAQ:NBEV) has already launched a cannabis-infused line, using the brand name Marley (as in Bob Marley).HEXO has something of an ace up its sleeve on this front, though. It's already working with alcohol giant Molson Coors Brewing (NYSE:TAP) to bring beverages to the Canadian market, a market that may be worth on the order of $3 billion, before the end of the year.Though Constellation and Canopy will provide formidable competition, Molson thinks HEXO was the better partner. It would know, too. It held discussions with Aurora Cannabis and Aphria (NYSE:APHA) along with two other unnamed outfits, but Frederic Landtmeters, the CEO of Molson Coors Canada, ultimately concluded it was Hexo's "track record of innovation" that would make it the highest-potential partner.Then there's the detail investors have likely overlooked; Hexo is arguably better prepared to get a foothold in the growing U.S. market than most cannabis companies.Hexo USA was only officially launched a couple of weeks ago, but its CEO, Sebastien St. Louis, has already been in the United States for a while, speaking with investors, laying the groundwork for the company's future in the country.What that future has in store remains unclear, particularly given the fact that recreational cannabis and even medical marijuana remain illegal in much of the United States. But Oppenheimer analyst Rupesh Parikh noted in February, when he first started covering Hexo stock, that he expects HEXO to develop partnerships in non-beverage categories like cosmetics, edibles and vapes. That's important simply because, in the United States and Canada, consumers who are interested in trying cannabis for the first time are more likely to do so by eating or drinking it rather than smoking it.Others are already in the space, to be clear, but no cannabis company has yet entered into an edibles-oriented partnership from a major name. HEXO may be quietly mulling the industry's first such deal, if Parikh's instinct is on target. Looking Ahead for Hexo StockBank of America's Christopher Carey noted in April, "HEXO is our Top Pick in cannabis, screening compelling in our valuation framework vs peers (EV/sales and DCF), and with fundamentals grounded by the most de-risked cannabis supply in Canada (off-take with Quebec), an innovation-forward organization and potential for additional value-add partnerships (beyond that already developed with Molson Canada)."HEXO alluded to such value-added partnerships when Hexo USA was launched, bolstering comments already offered by Oppenheimer. And Molson has already noted how innovative the company has been.The assessments remain largely the same from one impartial observer to the next.Hexo stock may not be the absolute top pick in the cannabis space, as Carey suggests, but there's no denying HEXO is a marijuana stock that's been erroneously ignored.As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Stocks to Buy As They Hit 52-Week Lows * 4 Antitrust Tech Stocks to Keep an Eye On * 5 Gold and Silver Stocks Touching Intraday Highs Compare Brokers The post Hexo Stock May Be the Cannabis Industry's Best-Kept Secret appeared first on InvestorPlace.
At Benzinga's Cannabis Newsdesk, we want to keep our readers as informed as possible. We understand that the cannabis industry is moving at a very fast pace and it’s often hard to keep up. One way we deal with ...
If you're a contrarian in the cannabis space, you're likely very intrigued with New Age Beverages (NASDAQ:NBEV). Not only is the underlying plant one of the hottest commodities in the market, cannabis is going mainstream. A particularly attractive subsegment is cannabidiol or CBD-infused drinks. With New Age Beverages specializing in this sector, NBEV stock immediately catches the eye.Others have embraced the idea of CBD beverages. Canopy Growth (NYSE:CGC) and Hexo (NYSEAMERICAN:HEXO) have secured deals with big-time beverage makers. But as InvestorPlace feature writer James Brumley noted, NBEV was the first to hit the market. Almost always, that's better than being the first to have the idea. And with the competition lollygagging, NBEV launched the Marley brand last fall.InvestorPlace - Stock Market News, Stock Advice & Trading TipsSubsequently, NBEV stock soared from $1.53 to just under $10. That paradigm shift occurred over a matter of days. * The 10 Best Stocks for 2019 -- So Far But Brumley is cautious on the longer-term outlook for New Age Beverages stock, and for good reason. Management recently forked over some funds and possibly resources to acquire healthy-products maker Brands Within Reach. Supposedly, it's an "incredible deal." But to Brumley's point, we just don't know the specifics.That immediately raises suspicion. More critically, though, CBD-infused drinks are currently a tough sell. Although the concept is appealing, the retail market itself is filled to the brim with competitors. Plus, the market size is very modest.Investing heavily into this segment will seemingly yield very little reward. As such, investors took their profits and dumped NBEV stock after the announcement, with shares down 15% in the days since the June 3 announcement. To compare, the cannabis-focused ETFMG Alternative Harvest ETF (NYSEArca:MJ) is little changed while the beverage-heavy First Trust Consumer Staples AlphaDEX Fund (NYSEArca:FXG) is up almost 5% in the last few days. NBEV Stock is Fundamentally Stretched WideIn my view, New Age Beverages stock is an awkward play. Despite some obvious challenges, I believe in CBD-infused drinks for the long term.For one thing, the cat's out of the bag politically. In an unusually vitriolic time, both Republicans and Democrats have found surprising consensus in marijuana-related issues. While the federal government still classifies weed as a Schedule I drug, economic tensions also help the green sector in eventually overturning this classification.After all, President Trump can't keep playing hardball with China and Mexico without incurring domestic pain. And that translates into angry voters come 2020.Second, CBD specifically levers compelling evidence for medicinal effectiveness. Sure, medical doctors downplay this evidence because prescribing plants isn't exactly super-profitable. But they can't deny that many patients reported benefits with consuming CBD.Therefore, I'm willing to extend patience to names like Canopy Growth or Hexo. But NBEV stock? That's a tough one. If NBEV simply concentrated on cannabis-related products, I believe the investor community would give them considerable leeway. Cannabis is an unprecedented market, so it makes sense that it receives unprecedented flexibility.But NBEV stock isn't just a CBD competitor. Its acquisition of Brands Within Reach, which includes brands like Nestea and Evian, provides the proof. Instead, New Age Beverages seeks to dominate the broader healthy beverages market.In other words, NBEV has very normal ambitions. Because of that, investors will have normal expectations.One of those expectations is margins: prospective stakeholders will seek outsized profitability metrics. If you look at established beverage-makers like Coca-Cola (NYSE:KO), Pepsico (NASDAQ:PEP), or Monster Beverage (NASDAQ:MNST), they all feature strong margins.As a rule of thumb, beverage-makers should have on average higher margins than food companies. However, NBEV lags significantly in this department. No Outstanding Catalyst for NBEVAnother headwind I anticipate is that no outstanding catalyst bolsters the case for NBEV stock. I'm more convinced about this now after having looked at their website.Like any beverage company, NBEV has their core brands displayed front and center. The problem is, I'm not inspired by any of it. Nor have I heard of any of the brands they carry (outside their recent acquisition). * 10 Stocks to Buy That Could Be Takeover Targets Of course, my anecdotal observation isn't the end all, be all of anything. But I do a considerable amount of grocery shopping. Plus, I'm in the market for healthy beverages. If I can't recognize at least one of these brands, you gotta figure New Age Beverages stock has an uphill battle to climb.And this segues into my final point: I think NBEV stock has a credibility problem. They're competing in a very broad and saturated market. I'm not sure if they have the resources to withstand choppy waters that are surely coming.Although I like the CBD angle that New Age carries, I think there's too many questions. It might work out as a trade, but I'll be watching from the sidelines.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 6 Retailers Including Disney Agree to Ditch On-Call Scheduling * The 10 Best Stocks for 2019 -- So Far * 7 Small-Cap ETFs to Buy Now Compare Brokers The post Fundamentally Unsound New Age Beverages Stock Is Too Risky appeared first on InvestorPlace.
The Zacks Analyst Blog Highlights: GW Pharmaceuticals, Canopy Growth, Aurora Cannabis and Hexo
You know you're writing too much about marijuana when a search for sector players like Hexo (NYSEAmerican:HEXO) brings up your own articles. And you really know you're going overboard when other analysts cite your work as expert opinion. But this "anything goes" dynamic really points to the broader opportunity in HEXO stock.Source: Shutterstock If I wrote about an established blue-chip name like Altria (NYSE:MO), I could probably search for days before my last article on the topic comes up. Everyone talks about Altria. Adding one more opinion on the subject is like relieving yourself in the Pacific Ocean. It matters, but only in the technical sense.On the other hand, discussing HEXO is like relieving yourself in the jacuzzi. It matters, especially if the jacuzzi water didn't originally have a yellowish tint.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Bank Stocks to Leave in the Vault What's the point about my biological analogies, you ask? Small actions can have a big impact on young markets. That sentiment applies to both directions, as the HEXO stock price recently demonstrated.On a year-to-date basis, shares of the cannabis firm are still at astonishingly elevated levels. However, since the April 29 close, Hexo stock has dropped 24% in the markets.Part of the reason why the equity collapsed involves the same motivation for why other marijuana stocks have gone volatile: good ol' fashioned profit taking. With Hexo stock doubling a little over a month ago, early investors bailed out.Secondly, as InvestorPlace contributor Ian Bezek pointed out, HEXO and other cannabis players have a credibility issue. You can't have a market capitalization in the billions and revenue in the millions indefinitely.But once the profit taking in Hexo stock fades, I'd consider going long for one reason: cannabidiol. Underappreciated OpportunityWe've passed the infancy stage of the cannabis revolution, which is participation. Of coure, this low-hanging fruit didn't last because growing marijuana isn't rocket science. Companies now are differentiating themselves through marijuana specialties, such as mass production or cultivating medically effective strains.How does HEXO distinguish itself from the pack? The answer is cannabidiol, or CBD.This isn't a new argument. In fact, it's quite an old one. As our own James Brumley noted early this year, CBD-infused beverages represent a crowded market. It's also a very modestly sized one in terms of revenue. Thus, critics have argued that this trend is a fad.On the surface, this circumstance bodes poorly for the HEXO stock price. The underlying company inked a promising venture with Molson Coors (NYSE:TAP) to produce CBD-infused beverages. But that potential dies if this niche fails to take off.Admittedly, early signs don't look encouraging. However, this is still a very young market where a series of small actions can spark something massive.I'm especially intrigued with CBD's medicinal potential. According to Harvard Health Publishing contributing editor Peter Grinspoon, some evidence exists for the cannabis plant's therapeutic claims. Dr. Grinspoon even cites research on marijuana's impact on traumatic brain injuries. * 7 Stocks to Buy for Monster Growth The obvious caveat is that more evidence is necessary to establish CBD as a genuine therapeutic platform. Still, that's what makes CBD, and indirectly Hexo stock, an exciting proposition. We don't yet fully understand marijuana because mainstream research on the plant is still relatively scarce. But the fact that at least some positive data exists is undeniable.That's also why I don't think CBD-infused beverages is a fad. This isn't a flavor of the week. Instead, the mainstreaming of CBD could eventually catalyze a paradigm shift in cannabis perceptions. Patience Could Go a Long Way with Hexo StockWhile Dr. Grinspoon's article is a recommended read, I especially encourage you to read the comments section.One caught my eye. A reader claimed that her mother suffered from severe pain, requiring opioids to cope. But with CBD and other cannabis-related medicines, she is able to enjoy a better quality of life.Rather than blast someone for using unproven alternative therapies, Dr. Grinspoon instead encouraged the weening off opioids. In my opinion, that's very telling coming from a medical doctor deeply embedded in the mainstream health care system.If you ask me, it appears medical professionals prefer natural CBD products over exotic pharmaceutical concoctions.But this is not a license to jump aboard Hexo without fully appreciating the risks. The HEXO stock price can just as quickly rise or erode. Like I said, it's a young market: an unwelcome stream can put an immediate damper on your relaxing jacuzzi.But if you drill down into the science and data, it's more likely that any surprises will be positive ones. Therefore, I'm interested in taking any significant dips in HEXO as longer-term buying opportunities.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Stocks to Sell Impacted by the Mexican Tariffs * 6 Big Dividend Stocks to Buy as Yields Plunge * The 10 Biggest Announcements From Apple WWDC 2019 Compare Brokers The post Underappreciated CBD Market Is The Key For HEXO Stock appeared first on InvestorPlace.
Cannabis stocks like Aurora Cannabis (NYSE:ACB) are struggling at the moment. ACB stock is up over 50% so far this year, but it has dropped nearly 30% from its March highs. Whether the weakness is being caused by concerns about the stock market or a lack of patience, Aurora stock isn't the only cannabis stock that's headed in the wrong direction.Source: Shutterstock InvestorPlace - Stock Market News, Stock Advice & Trading TipsCanopy Growth (NYSE:CGC) is down 20% over the last month. Cronos Group (NASDAQ:CRON) has fallen 40% since early March. A "risk-off" trade in equity markets likely is a factor. But the problem for the cannabis space - and for Aurora Cannabis stock - is that there's not really a catalyst left on the horizon. * 6 Big Dividend Stocks to Buy as Yields Plunge Aurora's growth recently has been particularly impressive. Its net revenue quadrupled year-over-year during its fiscal third-quarter report, which was supposedly disappointing. It wasn't enough, however: ACB stock fell on the news and has continued to drop.The problem for ACB stock, and for the space as a whole, seems reasonably simple: investors are trying to figure out what's next. So far, neither Aurora Cannabis nor the industry seems to have the answer the market wants to hear. Aurora Stock Falls After Its EarningsIt might seem odd that Aurora Cannabis stock would decline after the Q3 report. Its revenue and earnings did miss Wall Street expectations, but not by much. As I noted, its revenue quadrupled. Its gross margins held up reasonably well, even though lower-margin, dried products made up a higher mix of its output. Perhaps most notably, its production nearly doubled quarter-over-quarter.ACB's cash costs fell. Its international revenue rose 39% versus Q2; that's impressive for a company that has made a clear effort to expand its overseas reach. Its SG&A (selling, general, and administrative) expenses did rise 327%, but that was roughly in-line with its revenue growth. Given how aggressively Aurora is spending and the acquisitions it's made, that increase shouldn't be much of a surprise.Even with the miss relative to the average Street expectations, it's difficult to see the quarter as anything other than a validation of its strategy. Indeed, Luce Emerson made exactly that argument on this site after the report was released. The Outlook of Aurora StockBut there are two issues with relying on ACB's Q3 results. First, ACB stock wasn't cheap, or close to it, heading into the report. Aurora stock was trading at close to 30 times analysts' average FY19 revenue estimate heading into the results. A strong quarter was already priced into ACB stock, as was years' worth of growth.Secondly, that valuation meant, and means, that Aurora Cannabis needs to grow more quickly than its aggressive valuations suggest. It fell short of that growth in Q3. Looking forward, the question is how it can accelerate its growth.After all, much of the quarter's growth came from the opening of the Canadian market to recreational products, but that happened almost eight months ago. ACB's international revenue did grow nicely, but it's still just 6% of the company's total sales.With overall Canadian retail cannabis sales relatively flat, the obvious concern becomes clear: What will drive ACB stock in a year and beyond? And as Aurora ramps production of cannabis - along with Canopy, Cronos, Tilray (NASDAQ:TLRY), Hexo (NYSEAMERICAN:HEXO), and myriad others - what will happen to cannabis prices? Be Careful With Aurora Cannabis StockUnsurprisingly, cannabis stocks have been very volatile recently, and ACB stock has been no exception. Aurora Cannabis stock lost over half its value in the last two and a half months of 2018, and then doubled in the first two and a half months of 2019.The recent declines of ACB stock , however, look like the beginning of another major downturn. There simply isn't a catalyst on the horizon. U.S. congressmen are pushing for legalization at the national level, but not much progress on that front will be made until 2020, at least. The new Farm Bill led to optimism late last year, but hemp alone isn't moving the needle for ACB stock and its $7 billion-plus market capitalization.Meanwhile, there's still the worry about the story Aurora is telling, as I wrote before its earnings. ACB likely is the highest-risk and highest-reward play in cannabis,, given how aggressively it's moved into so many geographic and product markets.That was a good thing for ACB stock at the beginning of the year. In a weakening cannabis sector, however, it's becoming a reasonably large problem.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 7 Stocks to Sell Impacted by the Mexican Tariffs * 6 Big Dividend Stocks to Buy as Yields Plunge * The 10 Biggest Announcements From Apple WWDC 2019 Compare Brokers The post What Now for Aurora Cannabis Stock and Other Cannabis Plays? appeared first on InvestorPlace.
Monday blues is an understatement for New Age Beverages (NASDAQ:NBEV). The company announced that it would acquire food-and-beverage outfit Brands Within Reach, owner of Nestea, Evian and other labels. But with no details on the purchasing structure or even the ultimate price, the markets quickly upended NBEV stock.It's just as possible, however, that the setback was going to take shape anyway. In this scenario, traders were simply waiting for the right excuse to make it happen.InvestorPlace - Stock Market News, Stock Advice & Trading TipsRegardless of the true reason behind Monday's selloff, the move has very likely done some technical damage to NBEV stock. Eventually, this impairment will lead to more downside. Perhaps worse, the cannabis backstory that kept so many overvalued names moving higher appears to have run its full course.Now, this narrative won't be useful again as a bullish talking point. Traders Never BelievedThere's no denying it: New Age Beverages stock rode the cannabis craze. In September, management announced that it would launch a CBD lineup of beverages in the foreseeable future. * 7 Bank Stocks to Leave in the Vault This decision followed a well-worn pathway. For instance, the planned joint venture between Constellation Brands (NYSE:STZ) and Canopy Growth (NYSE:CGC), and the partnership between Hexo (NYSEAMERICAN:HEXO) and Molson Coors (NYSE:TAP) forged similar synergies.However, New Age Beverages arguably beat them all to the punch. The unveiling of its Marley (as in Bob Marley) brand during the fall of last year was a massive catalyst. It pushed NBEV stock from $1.53 to a peak of $9.99 in the span of just five trading days.A huge swath of traders, however, never really believed that surge was meant to last.As of the latest look, more than 30% of outstanding shares of NBEV stock (and more than 32% of the float) were held as short positions. These are risky bets that the equity will move lower rather than higher. For perspective, a typical short ratio for a less-hyped ticker might be on the order of (very) low single digits. Even riskier names like Hexo and Canopy Growth are only sporting short interest of 5% and 8%, respectively, right now.Such a degree of doubt can have one of two polar-opposite outcomes. On one hand, an "upside panic" could force short sellers to buy NBEV stock to close out their bearish position. On the other, all those short sellers could be right, and shares crumble.Given the shape of New Age Beverages stock for the past several weeks followed with Monday's move lower, it's difficult to say the bears and doubters didn't make the right call. But their party is far from over considering the technical damage done on Monday. Charting New Age Beverages StockMany securities have survived worse than Monday's 6% setback. But in this case, even the low-volume move lower portends more problems. Click to Enlarge Chief among the red flags is the way the tumble carried NBEV stock below the lower edge of a converging wedge pattern that had been forming since September's peak. A close second concern is the fact that the selloff also dragged New Age Beverages stock below a recently developed technical floor around $5.04 (yellow) as well as under its 200-day moving average line (white).Some bulls are already pushing back, but not enough of them. As long as they're unable to push shares back above $5.04, the bears remain in control. They're also well-positioned to take another, more damaging swipe.As for the profitable short sellers that haven't bailed out, they're not likely to do so now. The risky phase of their trade is now in the rear-view mirror. Their next task is pinpointing where the next most likely bottom is now that the previous most-likely floor has been broken as support. Looking Ahead for NBEV StockEventually, all of those short sellers will have to close out their positions by buying NBEV stock back. But anyone anticipating a short-squeeze rally taking shape in the near future is betting on the less likely outcome.With a lack of volume following the stumble, a dead-cat bounce doesn't appear to be in the cards. And with the purchase of an entity that's outside of the cannabis realm -- suggesting there are fewer cannabis-related acquisition options -- the bullish case for NBEV stock further deteriorates. That's because marijuana was the only thing really propping this name up. Even then though, the marijuana narratives weren't doing a great job.Monday's action is likely to be the nail in that coffin, keeping shares subdued for the foreseeable future.As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley. More From InvestorPlace * 4 Top American Penny Pot Stocks (Buy Before June 21) * 10 Heavily Shorted Stocks to Sell -- Because the Bears Are Right * 7 Bank Stocks to Leave in the Vault * 7 Stocks for You to Profit From (Legal) Insider Trading Compare Brokers The post Even Under $5, New Age Beverages Stock May Not Be Done Falling appeared first on InvestorPlace.