HEXO) is not an exception to this observation. Hexo stock has been under considerable pressure, down 37% in 2019 and more than 70% from its May high.” data-reactid=”11″>Cannabis stocks have been on the mend lately, although most are still carrying painful losses this year. Hexo (NYSE:HEXO) is not an exception to this observation. Hexo stock has been under considerable pressure, down 37% in 2019 and more than 70% from its May high.
Source: Shutterstock
Is the cannabis space really going to make a comeback? That much isn’t clear yet, unfortunately. But we can determine which ones to buy in the event that names like Hexo stock do rebound.
In November, these names fell off a cliff. I mean, really tanked hard amid relentless selling. Painful as it was, the plunge at least got the discussion going that perhaps these names were capitulating. There could still be some end-of-year selling as investors look to lock in tax losses, but positive signs are starting to emerge.
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they turned positive and started to gain momentum. How could cannabis stocks be green on the day when the S&P 500 index was down 1.3% for the session?
These are not high-quality equities or a flight-to-safety asset class. That got my attention and I’m now taking the charts more seriously.
Trading Hexo Stock
Click to Enlarge
Source: Chart courtesy of StockCharts.com” data-reactid=”33″>
Click to Enlarge
Source: Chart courtesy of StockCharts.com
flagged a few of these breakdowns, like Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB), cautioning investors to be careful now that key support was giving way.” data-reactid=”46″>At the beginning of summer, cannabis stocks started to swoon. I flagged a few of these breakdowns, like Canopy Growth (NYSE:CGC) and Aurora Cannabis (NYSE:ACB), cautioning investors to be careful now that key support was giving way.
TLRY) is down 90%. Ouch!” data-reactid=”48″>I didn’t expect it would lead to some of the declines we’ve seen since. Many of these names are down 60% to 70% from the highs, while Tilray (NASDAQ:TLRY) is down 90%. Ouch!
two developments are now critical for bulls. First, Hexo stock price must avoid making new lows. It was a panic collapse that sent shares down to $1.56.” data-reactid=”49″>However, most of these names are rebounding from the lows — Hexo stock included. Like I said of CGC the other day, two developments are now critical for bulls. First, Hexo stock price must avoid making new lows. It was a panic collapse that sent shares down to $1.56.
We’re unlikely to go from a sharp downtrend to a massive uptrend overnight. There will be setbacks along the way, but we need to see these two developments before we can trust Hexo.
On the chart above, investors can also see that $2 has played a key role lately. Below it should put investors on caution for a possible retest of the lows. If it can hold above $2 a share, a test of its downtrend marks will be in the cards, as well as a possible push to $3. Let’s keep an eye on Hexo stock.
Bottom Line on Hexo Stock
Do the charts make Hexo stock a buy? In a word: no. The charts show that the situation is improving from a few weeks ago, but has not signaled the all-clear to investors just yet.
So what about the fundamentals?
low revenue figures. Further, most are not free cash flow positive or profitable, yet garner valuations in the billions.
Because of the large correction this year, Hexo stock now sports a market cap of $527 million. Is that too much? Well…
Last year, Hexo had net revenue of 47.3 million CAD ($35.9 million) and lost over 86 million CAD. Investors should know that profits have been elusive for this company.
unrestricted cash, some investors have to be nervous. That’s even as current assets sit at 314 million CAD, compared to just 52.6 million CAD in current liabilities.
APHA) and Canopy Growth stock, which have stronger balance sheets.” data-reactid=”66″>But the acceleration in liabilities — with total liabilities up to 104.3 million CAD last quarter from 17.3 million CAD three quarters ago — and the negative cash flow is a concern. Hexo isn’t the worst pick, but amid a cannabis comeback, I prefer Aphria (NYSE:APHA) and Canopy Growth stock, which have stronger balance sheets.
Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long APHA.
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