quinlash wrote: Company History
(Taken from Company Homepage)
HEXO Corp is an award-winning consumer packaged goods cannabis company that creates and distributes prize-winning products to serve the global cannabis market. Through its hub and spoke business strategy, HEXO Corp is partnering with Fortune 500 companies, bringing its brand value, cannabinoid isolation technology, licensed infrastructure and regulatory expertise to established companies, leveraging their distribution networks and capacity.
As one of the largest licensed cannabis companies in Canada, HEXO Corp operates with 2 million sq. ft of facilities in Ontario and Quebec and a foothold in Greece to establish a Eurozone processing, production and distribution centre.
Incorporated in 2013 under the name The Hydropothecary Corporation, the company was created to meet the needs of the Canadian medical cannabis market. With the advent of the legalized market in 2018, the company became HEXO Corp, for both adult-use (recreational) and medical markets.
Summary by StockHouse User: Quinlash
HEXO has released Cannabis 2.0 Products such as their VeryWell oil, Kilk product, Vapes have been rolled out across Canada and now have 5 of their drinks rolled out with more to be announced in the coming months, we also have the new supply deal with Israel where the company just sent recently sent over half a ton of product. Based on the selling price per gram (outlined in the 2020 Q3 QTR report) the top line sales number for that transaction is $1.7 Million Dollars
Last QTR report beat expectations with an increase in sales of 30%. Upcoming QTR report will include additional news products reaching the market and may include the numbers from the Israel deal.
HEXO is reporting an overall Gross-Margin of 40% compared to the 9% Reported by Canopy Growth. HEXO is also reporting growth in Market Share compared to Canopy Growth actually losing Market Share.
Based on the transcript from the last QTR report HEXO is expecting to turn EBITDA positive in Calendar year 2020 or within the first 2 months of 2021 which will beat both Aurora Cannabis and Canopy Growth based on their current projections (Aurora expected in apx 3 years, Canopy withdrew their estimates).
Link to Q3 QTR Report Transcript
https://www.fool.com/earnings/call-transcripts/2020/06/11/hexo-corp-hexo-q3-2020-earnings-call-transcript.aspx
Sales are picking up and can be easily confirmed by looking over QTR reports to see the continual trend upward in sales numbers.
Link to HEXO QTR Reports:
https://www.hexocorp.com/investors/
HEXO has a strong partnerships with large companies such as Molson Coors. The first business with Molson was formed in 2018 (Truss Beverages) and a second one was formed between the two companies in April of 2020. The second operation was formed to expand sales into the U.S. HEXO also has partner in Greece (details are limited on this one)
If you are looking to check the boxes as to why HEXO is likely to not only survive but thrive (IMHO) going forward:
- Licensed for both Medical and Recreational Cannabis
- Within top 4 Suppliers in Canadian Market with objective of moving to #2 Spot
- Partners with major markets players (Molson 2nd largest brewer in North America / Fortune 500 Company)
- Company with European Operations
- Company with exposure to U.S. Markets
- Competitive Pricing vs. Black Market
- Providing accessories to support product sales
- Producing High-Margin Cannabis 2.0 Products
Including (but not limited to): Vapes, Oils, Infused Drinks, Chocolates, Gummies, CBD Oil Droplets. THC Droplets for Flavored Drinks, non-alcoholic beer and wine.
Best Known Concern Regarding Share Price Currently:
The most credible and well-known risk on the stock at this time is the possibility of a reverse split occurring. HEXO has received notice from the NYSE that their share price has falled too low to remain listed on the exchange and have been provided until Dec 11th, 2020 to correct the non-compliance. If a delisting were to occur this could result in the stock being solely traded on the Canadian TSX exchange until it can again qualify to list both on the Canadian Exchange as well as again on one of the larger US Exchanges.
Due to the size of the America Market, and the large number of investors who use the NYSE it can be expected that the company will take action if the market does not move the share price above $1 USD.
In Summary:
HEXO is part of the emerging Cannabis industry which is still facing the slow rollout of Cannabis stores in Canada and awaiting legalization of the product within the United States. The upcoming U.S. Election this Nov may shed more light on exactly what the future holds for US Legalization.
Emerging markets are tough to call. Many companies may not make it across the finish line. HEXO, in my opinion, will be one such winner. With increasing market share and new products being rolled out from HEXO in conjunction with their Fortune 500 Partner, Molson-Coors, I am one who has placed my bet on their success.
Please be sure to do your own research and invest responsibly with only money you can afford to tie up in the markets for the time period which you are willing to be in.
Disclosure: I currently hold a position in HEXO with a time extending out to 2021 (Time of full or partial retirement from trading)