Hexo Corp (OTCMKTS:HYYDF) is headed back to the top after minor correction from one-year highs. The stock continues to elicit increased investors interest having emerged that it could be a potential acquisition target.
Hexo Price Analysis
In addition to the acquisition talk, underlying fundamentals have improved a great deal, and continue to support the upward momentum. For starters, the company has completed the first phase of its 1 million sq. Ft. greenhouse expansion, expected to strengthen its production capacity.
In addition, the company has entered underlined its expansion plans having set a foothold in Greece as it seeks to build a processing, production and distribution center in the region. The fact that the company is also the top supplier of recreational marijuana in the province of Quebec all but affirms its credentials and long-term growth prospects.
The stock has started to bounce back after pulling back from one year high of $7.17 to the $3.20 handle. After the recent bounce back, the stock faces immediate resistance at the $5.50 handle. A rally followed by a close above the critical resistance level should open the door for further movements back to 52-week highs.
Any sell-offs after the recent bounce back would experience strong support at the $4 a share level. A breach of the critical support level could open the door for short sellers to push the stock back to 52-week lows of $2.44.
In our view, Hexo Corp remains well positioned to continue climbing high in continuation of the long-term uptrend.
What Does Hexo Corp Do?
Hexo Corp through its subsidiary Hexo Operations is engaged in the business of producing, marketing and selling of cannabis in North America. Its product line includes dried marijuana under the product name Time of Day and H2 lines. It also offers Elixir a cannabis oil sublingual mist.
Hexo Corp remains well positioned to continue climbing high as investors react to a string of positive developments in recent months. For starters, the company is fresh from completing the construction of the first phase of its one million square feet greenhouse facility.
“We are proud that the construction project is hitting all its milestones while respecting aggressive timelines and staying on budget. The new production facility allows us to continue to scale-up which, once fully operational, will give customers across Canada access to HEXO products,” said Sébastien St. Louis, HEXO Corp’s CEO and co-founder.
Completion of the first phase paves the way for the company to scale up its cannabis production levels. According to Beacon Securities analyst, Russell Stanley, the company is on its way to clocking the 108,000 kg in cannabis production this year. Increased capacity should allow the company to meet the expected demand for recreational cannabis in Canada.
U.S Listing Push
The company has also filed for listing in the New York Stock exchange. Listing in the U.S would mark an important milestone in the company’s growth strategy as it seeks to broaden exposure to U.S institutional investors.
Hexo has already acquired a 25% stake in former Sear Building. The building will serve as the research development and distribution hub as the company looks to strengthen its cannabis product offerings. The company is also planning to expand its product line when it comes to cosmetics, vapes, and edibles.
The company has also unveiled a new joint venture with Molson Coors Canada. Truss is the name of the joint venture whose goal is to come up with cannabis-infused beverages. The new product line should strengthen the company’s prospects ahead of the opening of the edibles and drinks market this year
In addition to strengthening its production, capacity in North America, Hexo Corp has also set sights on international expansion. Conversely, the company has entered into a strategic partnership with a Greek company having set eyes on the medical marijuana market in Europe. The company is also eyeing opportunities in Latin America among other international markets as part of its expansion drive
In response to the recent developments, Beacon Securities has initiated coverage of the stock with a ‘Buy’ Rating. Analysts at the firm believe the stock has the potential to rally, to the $11 a share mark on strengthening investors’ confidence in the stock.
Hexo has achieved significant milestones as it continues to strengthen its growth prospects in the marijuana sector. The company’s leadership position in the Quebec cannabis landscape all but affirms its credentials in the burgeoning sector.
The company has also moved to strengthen its production capacity with the expansion of the greenhouse facility. The unveiling of new product lines and expansion into new markets all but affirm growth prospects. For early movers, eyeing opportunities in the cannabis industry, Hexo Corp is an exciting pick especially after the recent pullback from one-year highs.
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Disclosure: We have no position in HYYDF and have not been compensated for this article.