HEXO Corp (HEXO)

[12yearplan]

Summary

In two weeks of recreational sales, Hexo sold 7x as much cannabis as they sold last quarter.

Hexo revenues quadrupled sequentially.

Hexo is still not coming close to satisfying demand: Cannabis sales are likely to 5x within two quarters based on signed supply deals.

I rate Hexo as a strong buy, and it is a core part of my cannabis portfolio.

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Note: All currencies herein are in Canadian dollars. Hexo trades on the Toronto Stock Exchange under TSE:HEXO, and there is a US ADR unit at (OTCPK:HYYDF).

Hexo: The First Two Weeks Of Recreational Cannabis Results Are In

(Author based on company filings)
Summary

Hexo (OTCPK:HYYDF) is the first Canadian cannabis producer to release earnings for a period that covers the legalization of recreational cannabis on Oct. 17.

Hexo's net revenue (after excise tax) jumped 301% sequentially, and Hexo sold 952 kg of recreational cannabis in only two weeks - compared to 152 kg of medical cannabis all quarter.

Hexo is not yet profitable as it is working to complete its 1,000,000 ft2 expansion and using part of its 250,000 ft2 facility for mothering plants - which reduces current production. Hexo will complete their expansion this month and will then be able to sell much more cannabis: Hexo's Quebec supply deal is for 20,000 kg/year this year and 45,000 kg/year in two years. This suggests that Hexo will sell at least 12x more cannabis in two years than they sell today.

In my view, Hexo is fairly valued based solely on the listed quantities on their Quebec supply agreement. On top of that supply deal, Hexo also has supply deals in Ontario and British Columbia - which can both generate much more revenue than they did this quarter, deals with private retailer Fire and Flower - which will pay incremental dividends soon, potential future revenue from European efforts with Qannabos, and may sell more cannabis to Quebec than the listed 20,000 kilograms. If any of these come true, shareholders may benefit.
https://seekingalpha.com/article/4228466-hexo-recreational-cannabis-propels-300-percent-qoq-revenue-growth