RE:Nothing Has Changed in Terms of Value MisterMontreal wrote: This week has been terrible. Like a lot of people here I'm kicking myself for not taking profits at 9, but like a lot of people here I was nervous to sell some of my shares if there was a chance of a sale or other major news coming. That being said... let's look at this objectively:
Riposte Capital calculated their $18 target price based on a 30X EBITDA for 2020. This was taking into account how the rest of the industry was priced. All of us who bought HEXO felt that the company was undervalued compared to the industry. One of two things was going to happen, either HEXO was going to go up, or the industry was going to go down. Bad news. The industry is going down. Unfortunately, it looks like HEXO is crashing as hard as everybody else. I don't understand why, but we're caught up in it.
Fair enough. I'm currently down almost $40 000 from last week. That sucks. I'm still in the green on HEXO, but not for much longer if this keeps going. I'm wondering whether to sell while I still have a profit to make, as small as it is, since it doesn't look like the downward trend has any possible end in site. This is not fun. I don't understand how this could be dropping this fast or who is selling so much. I expected TILRAY to crash, WEED to drop hard, and ACB a bit, but I thought our more reasonable value to shelter us somewhat from the drop. I guessed wrong. If we were all right 100% of the time everybody trading stocks would be a millionaire.
But now I'm telling myself this:
A company selling at 10X EBITDA on the S&P is considered healthy.
When Riposte wrote their letter in September I think Hexo was trading around $5. At that time Riposte calculated that was an 8.1X EBITDA.
HEXO is now selling product. A lot of product. More product than was expected. The SQDC had empty shelves for most of the week and their website had most HEXO products sold out. Yes HEXO's product names are not good (I'm not the only one to say that) and they should have just used the names of the strains and not their "Earth/Wind/Water" garbage... or something more Quebec-centric... but they have the supply agreement, and hopefully enough good sense to fix that fast, so that is not overly concerning yet.
In addition, they still have a lot of money in the bank, and they are even more attractive as a take over target or a merger partner now than they were on October 17th.
The company is healthy. Probably one of the healthiest in Canada. So the dream of $18 is pretty gone now, but at the same time $10 or $12 remains more than reasonable. No part of the company's intrinsic value has changed from one week ago. They have everything going for them (with the exception of the US listing, which I'm not confidant about now.) No, we probably won't get stupid rich on this, but we're going to make money. We just have to be patient and weather the storm.
We just have to be patient. Wait this out.
I'm going to stop logging onto this site, as it's polluted by idiots with one-day-old accounts who seem to have no mission in life other than to try to kill this stock or throw salt onto people's wounds. It's a cesspool on here.
I'm going to work on resisting the urge to keep checking the price... and six months from now when I log back in, hopefully my stocks will be up around the $8 or $10 level I think they should be at.
I recommend everybody going long does the same.
Namaste.
WELL SAID