Consumer Products

Why Hexo Is Making the Cannabis Industry Go Up in Smoke

Cannabis stocks took a big hit on Thursday after Hexo Corp. (NYSE: HEXO) gave an update on its fourth-quarter and full-year guidance. About a year ago, cannabis stocks saw a meteoric rise amid a buying frenzy. This year it seems to be a lot different.

In fact, the ETFMG Alternative Harvest ETF (NYSEMKT: MJ), which reflects the cannabis industry, is down at least 4%. While Hexo is getting the worst of this, all the other cannabis firms are feeling the burn too.

Hexo announced on Thursday morning that based on preliminary financial information and subject to year-end closing adjustments, the company expects net revenue for the fourth quarter to be roughly $14.5 million to $16.5 million and net revenue for the year to be approximately $46.5 million to $48.5 million.

Slower than expected store rollouts, a delay in government approval for cannabis derivative products and early signs of pricing pressure are being felt nationally, says Hexo. The delay in retail store openings in major markets has meant that the access to a majority of the target customers has been limited.

Sebastien St-Louis, CEO and co-founder of Hexo, commented:

Fourth quarter revenue is below our expectation and guidance, primarily due to lower than expected product sell through. While we are disappointed with these results, we are making significant changes to our sales and operations strategy to drive future results. Over the past quarter, we began re-configuring our operations to focus on high-selling strains and initiated a new sales strategy that we believe will meaningfully improve performance.  We plan to discuss these in more detail on our upcoming earnings call.

Shares of Hexo were last seen down 21% at $2.89, in a 52-week range of $2.71 to $8.40.

Tilray recently traded down about 10% at $21.54 a share, in a 52-week range of $21.00 to $178.85. The consensus price target is $48.58.

Cronos shares traded down 7%, at $7.99 in a 52-week range of $6.50 to $25.10.

Shares of Canopy Growth were down 9% to $20.84. The 52-week range is $20.52 to $59.25.

Aphria was trading down 8% at $4.95 per share, in a 52-week range of $3.75 to $16.19.

And Aurora Cannabis shares were down 5% to $3.89. It has a 52-week range of $3.80 to $12.52.