Pot stock to watch HEXO Corp (HEXO) (HEXO Stock Report) dropped over 3% on Monday after the company released disappointing results in Q1 2020. The company reported net revenue of CA$14.5 million which is a drop from the previous quarter’s CA$15.4 million. However, this was well higher than the CA$5.7 million reported in Q1 2019. Analysts were expecting revenue of around CA15.8 million in the first quarter of 2020.
Pot Stock to Watch HEXO: losses widen in Q1 2020
HEXO saw its net loss widen to CA$62.4 million or CA$0.24 per share. This is deeper compared to Q4 when the loss was CA$56.7 million and in Q1 2019 when it was CA$12.8 million. Similarly the company’s net recreational marijuana per gram equivalent dropped to CA$3.24 from CA$3.51 in Q4 2019. HEXO has indicated that the drop could have been more pronounced were it not for the sales of higher-end Up product line.[Read More]
Will This Pot Stock Bounce Back From Its Losses
The management is now blaming the slow process of the opening of more retail stores in various provinces for the losses they are incurring. HEXO CEO Sebastien St-Louis indicated during the earnings call that the company’s revenue growth has been affected by the sluggish opening of retail stores in Canada’s key provinces. Most pot stock executives have been blaming the lack of enough retail stores in the country as the reason why they are making losses.
Sebastien added that the retail channel will not be ready up to until the end of 2021 or somewhere through 2022. As a result, the black market will continue to flourish until there are enough retail stores for most Canadians. This will continue affecting the pricing of recreational cannabis as the black market offers cheaper product prices.
However, the challenges of lack of adequate stores could be addressed as from next year. For instance, Ontario which is the most populous province in the country has indicated that it is ready to address the challenge of fewer retail stores in the province. The province stated that it will open up the application process for cannabis retailers from January 2020.