Shares of Hexo Corp (NYSE:) (TSX:) have fallen steadily in recent days since the cannabis grower released its latest quarterly results.
The stock closed Monday at US$5.76, about 18.5% lower than where it traded early last week.
The Canada-based marijuana company posted sales of C$22.6 million (US$18.26 million), a figure that was 29% lower than the previous three months and a disappointing 35% below the expectations of analysts. Analysts had forecast that Hexo C would report $34.5 million (US$27.87 million) in revenue.
The miss of the results had the effect of a spoke being pushed into Hexo's wheel as it gained momentum in the competitive cannabis market with a series of offers. The Ottawa-based company had earlier this year announced deals totaling approximately C$1.3 billion (US$1.05 billion) to acquire three cannabis companies: Zenabis Global (OTC:) (TSX:), 48North Cannabis Corp. (OTC:) (TSXV: ) and Redecan Pharm.
These headline deals set the tone for Hexo's drive to expand and propel the company to become one of become the leading Canadian cannabis growers with international reach. a Stifel analyst said in a note last week that according to a report by BNN Bloomberg, Hexo's poor third quarter will alter its momentum somewhat.
Analyst Andrew Carter said:
"While Hexo's aggressive M&A activity had the potential to shift focus from any disruption in the company's momentum, especially in an industry-wide quarter that challenged results, the size of the underperformance the core business research and the ability to realize value from the three acquisitions.”
However, two of Hexo's three deals are not yet closed. And they are not expected to be completed until later this year as they await regulatory approval. Cronos to buy stake in PharmaCann
Cronos Group (NASDAQ:) (TSX:) announced last week that it was buying a 10.5% stake in PharmaCann, one of the largest privately held cannabis companies in the United States. States.
The deal, valued at $110.4 million, will take effect once cannabis is federally legalized in the United States. U.S. Cronos president and CEO Kurt Schmidt said the move is part of the company's US-focused growth strategy. PharmaCann operates in six states and has 23 pharmacies and six growing and manufacturing facilities. Shares of Cronos Group closed at US$8.56 yesterday, up about 2.5% on the day.
Connecticut becomes the eighteenth US state to legalize cannabis.
The state Senate voted to approve the move, which will allow the sale of recreational cannabis. Weed won't be formally legal until the governor signs the bill, a hurdle expected to pose few obstacles. According to published reports, marijuana sales in the state are expected to reach $750 million by 2025. In a tweet late last week, Curaleaf (OTC:) Executive Chairman Boris Jordan said that Senate Majority Leader Chuck Schumer, along with two additional Senate Democrats, will introduce holistic cannabis legislation in July.
