Many cannabis stocks made a comeback in the New Year, while others continued to struggle. HEXO stock is definitely in the latter category, slumping by 85% from its 52-week high.
Analysts Turn Bearish
Two analysts recently downgraded HEXO stock and revised their price outlook for HEXO Corp (TSX:HEXO) (NYSE:HEXO).
One of the more important concerns is the potential size of the Canadian market. Jeffries analyst Owen Bennett stated that there is a bit too much optimism about the Canadian market, adding that the boost from cannabis 2.0 is going to be virtually “non-existent” in the near-term. In addition to that, the slow roll-out of retail outlets in places like Quebec and Ontario remains a concern for further growth.
HEXO stock is now down by over 4% to $1.19.
For a while, it seemed like HEXO could have emerged as one of the leaders in the cannabis-infused beverages niche, but now it seems that might be far more difficult than previously anticipated.
The company teamed up with Molson Coors (NYSE:TAP) to produce cannabis beverages, and one of its initial products is a CBD-infused spring water named Flow Glow. However, companies like Canopy Growth (TSX:WEED) (NYSE:CGC) have found it difficult to identify the sort of beverages that might work in the United States, a problem that HEXO may also be faced with. Because of this, some of the optimism surrounding the space appears to have dissipated somewhat.
In addition to that, the company’s balance sheet suggests that it is not exactly flush with funds at this time. At the end of October 2019, the company had $65.4 million in cash balance and a free cash flow of a highly disappointing negative $246 million. As a matter of fact, Ello Capital expects HEXO to run out of cash in six to seven months.
Moreover, HEXO stock made a new 52-week low of $1.11 earlier in today’s session.