Marijuana Stocks: Why CGC and HEXO Soared Last Week

Marijuana Stocks: Why CGC and Hexo Soared Last Week
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Marijuana Stock News

It’s safe to say that 2019 has not gotten off to a quiet start for the pot industry. The marijuana stock news has been overflowing with excitement, with several major players seeing their fortunes rise over the past several weeks.

Two such companies—Canopy Growth Corp (NYSE:CGC) and Hexo Corp (OTCMKTS:HYYDF, TSE:HEXO)—gobbled up the most headlines with their massive runs as of late.

We’ll be examining why these companies saw their fortunes rise so high over the past few days.

Why CGC Stock Soared Last Week

There are a variety of reasons that CGC stock saw such gains last week—it stole headlines both for its near-term and long-term potential.

The most pressing development was a huge loan from a pair of large Canadian banks, valued at $80.0 million. The money is being funneled into PharmHouse Inc., a joint-venture marijuana company that’s owned in part by Canopy Rivers Inc (OTCMKTS:CNPOF, CVE:RIV), which is the investment arm of Canopy Growth Corp. (Source: “BMO, CIBC provide $80-million loan to Canopy Growth-affiliated pot company PharmHouse,” Financial Post, January 8, 2019.)

This sparked renewed interest from investors in Canopy Growth Corp, as banks have been reluctant for a long while now to enter the marijuana market for fear of reprisal from the U.S. government, which still maintains a stringent federal ban on cannabis.

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Canadian banks, however, showed that they are becoming less cowed by the day and were willing to shell out big money. Not only will this open the floodgates to supply the industry with much-needed capital to help spur growth, but it also lends an air of legitimacy to an industry that has long struggled with that due to its illicit origins and illegal status across large swaths of the globe.

Chart courtesy of StockCharts.com

CGC Stock Price

Another massive boon came to the Canopy Growth stock price because of its long-developing plan to enter the U.S. hemp market.

With the approval of the U.S. Farm Bill 2018, America is now free to cultivate hemp, a cannabis plant. Hemp can then be used to produce cannabidiol (CBD), one of the more exciting prospects in the industry. This has made Canopy Growth Corp and hemp bedfellows, and will allow the cannabis company to gain a foothold to the south.

Analysts believe that the CBD market in the U.S. could reach $1.6 billion a year in 2019, while the worldwide value of the CBD industry could hit $22.0 billion by 2022. (Source: “Aurora Cannabis is gearing up to break into the $1.6 billion CBD industry in the US,” Business Insider, January 14, 2019.)

This has naturally sparked an arms race between marijuana stocks, with each company looking to enter the newly opened U.S. market in the most dominant way possible.

It is worth noting that CBD still remains in a legal limbo of sorts. However, all signs appear to be pointing toward a near future where CBD use is permitted across the country (CBD does not contain the psychoactive components that would get one high).

The CGC stock price, therefore, is being juiced by its eagerly anticipated entry in the U.S. market.

Combine this with other interesting movements on the horizon for Canopy Growth stock—like Canopy LATAM and its expansion into the South American market—and you have a recipe for strong gains.

Piper Jaffray CGC Prediction

The final big push for Canopy Growth stock gains in the recent marijuana stock news came due to Piper Jaffray Companies (NYSE:PJC). Piper Jaffray became one of the few Wall Street firms to provide coverage for the marijuana industry, and its outlook is beaming.

The firm believes there’s a $15.0-billion to $50.0-billion total addressable market for legal marijuana, and named Canopy as an attractive marijuana stock likely to see gains moving forward. (Source: “Another major Wall Street firm starts covering cannabis as industry gains legitimacy,” CNBC, January 9, 2019.)

Wall Street, in this case, is playing catch-up; my readers will know that I’ve long admired Canopy Growth stock. That Wall Street is late to the party only means that those who invested in CGC stock early on are in for the biggest share of the gains.

Why Hexo Stock Soared This Week

While a number of factors converged to make the week a great one for Canopy Growth stock, the same cannot be said for Hexo stock.

While the company no doubt did have a great run (up 21% over the past month) it lags behind CGC stock’s whopping 34% gain in that same time—for good reason.

While I’ve long championed HYYDF stock, it didn’t make a splash in the marijuana stock news the same way Canopy did last week.

Still, there’s a lot to be excited about when it comes to Hexo.

Hexo Stock Q1 2019 Results

While the company’s Q1 2019 results landed in mid-December, they were so strong that they are still likely playing a role in HYYDF stock’s success.

The company more than doubled its total gram equivalents sold in the quarter to 1,110,000 grams.

The company produced an additional 3,550 kilograms in that same time, as well as continued with plans for a 1,000,000 square-foot facility.

The company also registered some of the first sales numbers post-legalization (the report covers the company through October, a full two-weeks after legalization was enacted). And the numbers are juicy.

“HEXO hit tremendous milestones in the weeks following the legalization of adult-use cannabis,” said Hexo’s CEO and co-founder Sebastien St-Louis. (Source: “HEXO Corp reports $6.7 million in gross revenue for the first quarter of new fiscal year,” GlobeNewswire, Inc., December 13, 2018.)

NYSE Listing

Another big push coming for Hexo stock is on the way via its listing on the New York Stock Exchange (NYSE).

The marijuana stock news several weeks ago was that Hexo was looking to add itself to the growing roster of NYSE marijuana stocks. With the ball rolling in the NYSE listing department, expect to see Hexo stock on the major U.S. ticker sooner rather than later, opening it up to additional capital and notice.

Hexo Stock Price

The Hexo stock price has been booming of late.

Better yet, this is still a marijuana penny stock, despite behaving much more like an industry heavyweight.

It has all the things you could want out of a top-tier marijuana company at a bargain price, making it one of my favorite stocks for the year.

Analyst Take

Both CGC stock and HYYDF stock have scored big wins in recent marijuana stock news.

In addition to the headlines, they were reinforced by the two companies’ groundwork done in 2018 to lay the foundations for a great 2019—and beyond. We didn’t even touch on how both these companies have deals with major alcohol producers to create cannabis beverages and marijuana-infused beers.

All things considered, these are some of my favorite marijuana stocks around, with huge potential to double their value this year.