Cannabis stocks slide significantly following HEXO earnings estimates

Oct 10 2019, 9:49 pm

Things are not great in the financial world when it comes to weed. October has been a rough month for the Canadian cannabis sector, as the industry’s share prices have been gradually slipping.

It all came to a head today — as reported by Kristine Owram of Bloomberg — recreational licenced producer HEXO indicated their earnings would be significantly lower than already adjusted figures. The result was a tumbling of 26% in the company’s share price, reaching lows not seen since pre-legalization in the spring of 2018.

According to a release from the company, HEXO expects net revenue for the fourth quarter to be approximately $14.5 million to $16.5 million and net revenue for the year to be approximately $46.5 million to $48.5 million.

“Fourth quarter revenue is below our expectation and guidance, primarily due to lower than expected product sell through,” said Sebastien St-Louis, CEO and co-founder of HEXO, in the release. “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.”

Among other factors, the company cites slower than expected retail rollouts and delays in the government’s approval for cannabis derivative products as hurting its projected earnings and preventing it from getting products into the hands of consumers.

According to the North American Marijuana Index, a site that tracks the leading stocks operating in the legal cannabis industry in the United States and Canada, the Canadian market as a whole has dropped 9.99% on Thursday alone.