Is HEXO Stock A Better Long-Term Investment Option Now?

The market has rebounded somewhat in recent days in the hopes of the reopening of the economy following the coronavirus pandemic induced lockdown. However, the situation has not been great with pot stocks, which have continued to remain depressed. That being said, it is also true that it could be the perfect opportunity for investors to make clever investments in some of the notable pot stocks in the market. One of the pot stocks that stand out at this point in time is the HEXO Corp (TSX:HEXO) (NYSE:HEXO). There are some factors that make it one of the more compelling stocks in the market.

Key Drivers

Hexo may have had its difficulties in recent times, but it is a company that has the wherewithal to eventually become one of the bigger players in the cannabis industry for years. It is not an attractive proposition merely because of the current rally but for generating potentially handsome returns for many years.

Hexo boasts of the second-highest number of patents among companies in the sector, and on top of that, it recently came up with Original Stash, its premium brand. Hexo has also created a research division and a food research laboratory in order to come up with more products.

However, that is not all. The company has managed to make a move into the potentially lucrative cannabis-infused beverage space and tied up with Molson Coors for the same. Hexo is collaborating with Molson Coors to launch a THC based beverage. According to studies, the cannabis-based beverage market could eventually grow into a $1.5 billion industry by 2026. If the company plays its cards right, then it could corner a significant portion of the market.

Hexo not only has a viable product in the pipeline in collaboration with a well-known brand, but it is also making progress in other avenues. Hence, the potential for growth is there, and investors could consider the stock.

How Should You Trade HEXO Stock Now?

In recent times, the Canadian cannabis industry has gone through a lot of difficulties, and most of the companies have been suffering. One of the companies that stand out in this regard is HEXO Corp (TSX:HEXO) (NYSE:HEXO). The company seemed to have turned a corner after it signed its largest wholesale supply agreement with Quebec.

Key Analysis

However, that turned out to be a false dawn as other problems cropped up, and the stock is now trading at $0.50 a share. As a result, the Hexo stock is possibly one of the more avoidable cannabis stocks in the market at this point.

Like many of the other companies in the industry, Hexo has also been scaling back its operations due to a lack of cash. For instance, the operations at the Niagara facility, which Hexo took over after the acquisition of Newstrike Brands, have been halted. The company is looking to close it down permanently and eventually sell it. However, that is not all. Hexo has also scaled down its production activities by as much as 33% over the course of the past six months and laid off 200 employees last year. In order to stay afloat, the company has had to make offerings of its stock.

Recently, Hexo raised C$46 million by selling 60 million shares, and those shares came with warrants with an exercise price set at C$0.46. These sorts of machinations from the company have further eroded the value of its stock. In this regard, it is also important to point out that the company has also got a warning from the New York Stock Exchange since its shares had traded for less than $1 for a 30 day trading period. The company has not rectified the situation yet, and unless the share doubles in price, Hexo might need to opt for a reverse split in order to stay listed. Stocks generally perform poorly after a reverse stock split.