HEXO Isn’t Inspiring Confidence after Q1 Earnings

HEXO (HEXO) has had a tough year. Its stock took a massive hit in October. Since its fiscal 2020 first-quarter earnings release on December 16, it’s fallen 3.6% as of yesterday. Let’s see how analysts view HEXO’s stock after its earnings results.

What are analysts’ views on HEXO?

Analysts’ bearish outlook for HEXO continued after the company’s first-quarter earnings. On December 17, analysts had the following ratings and target price changes:

  • PI Financial was bearish on the stock and downgraded it to “sell” from “neutral.” It also reduced the target price for HEXO to 2 Canadian dollars from 3 Canadian dollars.
  • Canaccord Genuity slashed HEXO’s target price to 2.5 Canadian dollars from 2.75 Canadian dollars.
  • CIBC reduced its target price to 2 Canadian dollars from 2.5 Canadian dollars.
  • MKM Partners cut its target price to 5 Canadian dollars from 6 Canadian dollars.
  • Cormark Securities cut its target price to 2 Canadian dollars from 3.25 Canadian dollars. The company also downgraded the stock to “reduce” from “market perform.”

Furthermore, LB Securities initiated coverage on HEXO stock with a “buy” rating. It also gave the stock a target price of 4 Canadian dollars.

In comparison, most analysts have given a target price of 12.6 Canadian dollars to Cronos Group (CRON) stock and rate it as a “hold.” Most analysts call Aphria (APHA) a “buy” and have a target price of 12.4 Canadian dollars on its stock. Aphria’s growth prospects look good under Irwin Simon’s leadership. To learn more, read Has Irwin Simon Really Turned Aphria Around?

Why analysts have a bearish outlook on HEXO

HEXO missed its revenue numbers in the fourth quarter and fiscal 2019 driven by fewer store rollouts, regulation delays, and various other factors. In its first quarter of fiscal 2020, HEXO’s revenue fell short of analysts’ expectation of 15.6 million Canadian dollars. It reported revenue of 14.5 million Canadian dollars. It also reported EBITDA of -24.6 million Canadian dollars. To learn more about HEXO’s results, be sure to read HEXO Stock Falls after Weak Q1 Earnings.

The company continued its dismal performance even in the first quarter of fiscal 2020. This performance could have driven analysts to become bearish on its stock.

Cannabis companies are hopeful for Cannabis 2.0. They expect to increase their revenues and profitability on edibles expansion. It remains to be seen whether HEXO can recover its substantial losses this year.

What do analysts recommend?

Currently, 15 analysts cover HEXO stock, down from 16 prior to its earnings release. Six analysts feel that the stock is a “hold,” while five call it a “sell.” Three call HEXO a “buy,” while one calls it a “strong sell.” Analysts have given it a target price of 2.8 Canadian dollars for the next 12 months. The current target price is 2.1% higher than the current trading price. The stock closed at 2.7 Canadian dollars yesterday.

How is HEXO stock looking?

HEXO’s downfall in October was mainly the result of Bank of America’s double-downgrade of its stock. The downgrade came after the company’s management announced that it wouldn’t be able to hit its fiscal 2020 guidance. The company also reported dismal fiscal 2019 fourth-quarter results. The stock lost 46% of its value in October. Year-to-date, it’s down 41%.

So far in December, HEXO is down 3.1%. Meanwhile, peer Cronos is up 1.6%, and Aphria is up 8.2%.

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