HEXO: Analysts Downgrade, But Stock Rises 1%

HEXO Corp. (HEXO) reported its fourth-quarter earnings of fiscal 2019 after the market closed on October 28. For the quarter, the company posted revenues of $15.42 million Canadian dollars. However, this was fewer than analysts’ estimates of $16.04 million Canadian dollars. The cannabis company’s net losses were $39.76 million Canadian dollars. These were a lot higher than analysts’ estimate of a net loss of $13.85 Canadian dollars.

HEXO: Analysts Downgrade, But Stock Rises 1%

Several analysts downgrade the stock

Following HEXO’s weak fourth-quarter performance, several analysts downgraded the stock yesterday.

  • Cormark downgraded HEXO from “buy” to “market perform.” Also, it lowered its price target from $5.50 Canadian dollars to $3.25 Canadian dollars.
  • Eight Capital cut its rating to “sell” from “neutral.” Also, it lowered its price target from $3 to $2.
  • Canaccord Genuity lowered its rating to “hold” from “speculative buy.” It also reduced its price target from $7 Canadian dollars to $3.5 Canadian dollars.
  • PI Financial downgraded the stock to “neutral” from “buy.” Also, it lowered its price target from $5 Canadian dollars to $3 Canadian dollars.

Overall, 16 analysts cover HEXO. Of these analysts, 25% favor “buy” ratings. Also, 56.3% recommend a “hold” rating, and 18.8% advocate a “sell” rating.

HEXO’s peer performance

Let’s look at analysts’ ratings for HEXO’s peers:

Analysts’ price target for HEXO

From the above graph, we can see that there is a significant drop in analysts’ consensus price target. As of October 30, analysts’ average price target for HEXO stood at $4.63 Canadian dollars. This shows a fall of 55.5% from $10.40 Canadian dollars on September 30. Yesterday, the CIBC (Canadian Imperial Bank of Commerce) lowered its price target from $3 Canadian dollars to $2.5 Canadian dollars.

Also, the lowering of price target from Cormark, Eight Capital, Canaccord Genuity, and PI Financial led to a fall in analysts’ consensus price target. The new consensus price target for HEXO represents a 12-month return potential of 55.9% from its stock price of $2.97 Canadian dollars on October 30.

On the same day, Aurora Cannabis, Canopy Growth, and Aphria were trading at a discount of 69.8%, 73.5%, and 94.9%, respectively, from their price targets.

Analysts’ outlook on HEXO’s stock performance

In the last 12-months, there has been an increase in the number of analysts covering HEXO. In October 2018, seven analysts covered the stock. Currently, 16 analysts cover the cannabis company. Analysts’ consensus price target shrunk from $8.82 Canadian dollars to $4.63 Canadian dollars during the same period.

Despite analysts’ downgrade, HEXO’s stock rose 1% higher to close at $2.97 Canadian dollars on Wednesday. However, the company lost 43.2% of its stock value this month. So, investors might have thought the stock had been oversold. This may have prompted a rise in its stock price.

HEXO’s stock has declined by 36.9% YTD (year-to-date). The abrupt resignation of its CEO and the management withdrawing its fiscal 2020 guidance appear to have led to a fall in the company’s stock price. HEXO has underperformed its peers and the broader equity market. YTD, the stock price of Aurora Cannabis, Canopy Growth, and Aphria shrunk by 33.3%, 27.6%, and 15.3%, respectively. During the same period, the S&P 500 Index rose by 21.5%.

MedMen Enterprises (MMEN) (MMNFF) reported its fourth-quarter earnings on October 28. You can read our analysis at “MedMen: Stock Falls over 20% after Q4 2019 Earnings.” Also, follow 420 Investor Daily for more marijuana-related news and updates.