Hexo (TSX:HEXO) stock tumbles over 6%: Buy or Sell?

Stocks of Hexo Corp. (TSX:HEXO), a cannabis goods retailer, dropped over six per cent in the opening trading hour (9:32 am EST) of Monday, June 14, after the company posted lower-than-expected third-quarter earnings. 

The pot company's non-beverage adult-use revenues jumped over 169 per cent year-over-year (YoY) in Q3 FY21 across Canada, except Quebec. Its overall net sales increased by two per cent YoY. 

Its topline improved by two per cent YoY for the quarter, with revenue hitting 22.66 million in Q3 FY21. However, quarter-over-quarter (QoQ) revenue posted a massive decline of 31 per cent, against C$ 32.88 million in Q2 FY21. 

This plunge in revenue came on the back of a C$ 5.2 million sales drop in adult-use non-beverage in the Quebec region. The company stated that hiccups in marijuana harvesting, and hash production impacted its sales in the province.   

HEXO Corp. (TSX: HEXO)

The pot firm sells packaged cannabis goods across Canada under its affiliated brands like Up Cannabis and Original Stash. The cannabis retailer's stock has risen by 72 per cent this year. It ended the previous trading week at C$ 8.02 apiece. 

The share price of HEXO has soared by nearly 125 per cent in one year. However, due to weak previous quarter performance, the stock declined by 14 per cent in the last three months. It holds a current market cap of C$ 1.1 billion. 

Hexo Corp's one-year stock performance against Moving Average Multiple and volume. (Chart Source: Refinitiv)

The stock opened at nearly C$ 7.46 apiece on June 14, slightly down against its short-term moving average multiple in the previous session, indicating the arrival of the bear phase. However, it is still up over 23 per cent compared to the 200-day simple moving average, representing a long-term uptrend pattern.

Hexo stock’s 10-day trading volume average is in line with the 30-day average volume of 1.7 million shares.

The company has been expanding its cannabis business across North America with a long-term vision. Hexo is planning to take over a privately-owned marijuana cultivator Redecan Pharma in a C$ 925-million deal. The Ottawa-based company expects to complete the deal this year.

If the market circumstances remain conducive, investors may choose to buy this dip or hold the stock in 2021. 

Please note: The above constitutes a preliminary view and any interest in stocks should be evaluated further from an investment point of view. The reference data in this article has been partly sourced from Refinitiv.

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