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Tuesday, November 24, 2020

Is a Bear Trap Building in Hexo Corp (OTCMKTS:HYYDF)?

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One of the most interesting names in the Canadian cannabis space continues to be Hexo Corp (OTCMKTS:HYYDF). The company just closed its “Truss” deal with Molson Coors, representing one of the most powerful strategic developments to currently define the cannabis-infused beverage opportunity. Further fleshing out the picture, the company just announced that its products will be available in Quebec via the Société québécoise du cannabis, in Ontario online, and in British Columbia online and in store.

According to the release, “HEXO has also delivered valuable training materials for front-line retail cannabis employees. Today, the adult-use Canadian market will gain access to HEXO’s product lines, including dried flower, oils, decarboxylated (or pre-activated) powder, and pre-rolled cones.”

Hexo Corp (OTCMKTS:HYYDF) trumpets itself as a company that, together with its subsidiaries, produces and distributes medical marijuana products. The company is headquartered in Gatineau, Canada, and, as noted above, just changed its corporate name from “The Hydropothecary Corporation” to “HEXO Corp.” effective August 29, 2018.

HEXO creates and distributes innovative, easy-to-use and easy-to-understand products to serve the Canadian cannabis market. One of the country’s lowest-cost producers, HEXO is rapidly increasing its production capacity in the lead up to the adult-use cannabis market.

The Company currently operates with over 310,000 sq. ft. of production capacity with construction on another 1,000,000 sq. ft. expansion set to be complete by year-end. HEXO will serve the adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand.

According to company materials, “HEXO Corp. creates and distributes innovative, easy-to-use and easy-to-understand products to serve the Canadian cannabis market. One of the country’s lowest-cost producers, HEXO is rapidly increasing its production capacity in the lead up to the adult-use cannabis market. The Company currently operates with over 310,000 sq. ft. of production capacity with construction on another 1,000,000 sq. ft. expansion set to be complete by year-end. HEXO will serve the adult-use market under the HEXO brand, while continuing to serve its medical cannabis clients through the well-known Hydropothecary brand.“

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As noted above, HYYDF just announced that its products will be available in Quebec via the Société québécoise du cannabis, in Ontario online, and in British Columbia online and in store. In all, traders will note nearly -20% stripped out of share pricing for the listing in the past week.

But the stock remains in a strong upward trend with rising key moving averages in place under the price. Moreover, the name has seen interest climb, with an increase in recent trading volume of 150% over what the stock has registered over the longer term.

“We know our audience, and we are delivering products powered by HEXO that align with their expectations and preferences for cannabis experiences,” said Adam Miron, HEXO Corp’s Chief Brand Officer and co-founder. “Our goal is to become a leading global company and to have a strong international presence. To achieve this goal, we know that we need to think about more than products and prices. We must also look at our impact on the natural and social environments in which we operate.”

Now commanding a market cap of $1B, HYYDF has a significant war chest ($248.9M) of cash on the books, which must be weighed relative to about $9.8M in total current liabilities. HYYDF is pulling in trailing 12-month revenues of $4.4M. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 4.9%. You can bet we will update this one again as new information comes into view. Sign-up for continuing coverage on shares of $HYYDF stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $HYYDF, either long or short, and we have not been compensated for this article.

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