Shares of Pyxus International (NYSE:PYX) were 9.2% higher as of 11:36 a.m. EST on Friday after rising as much as 11.9% earlier in the session. There was no new development for the company. However, the stock appeared to be enjoying continued momentum from Pyxus' Q3 earnings announcement on Monday. Shares have soared over 40% since the company provided its Q3 update.
Based on the stock's performance today and over the last few days, you might think that Pyxus reported fantastic revenue and earnings growth for the third quarter. That wasn't the case. Pyxus actually posted year-over-year sales growth of 9.8% -- not bad, but not awe-inspiring, either. The company also recorded a loss of $5.1 million.
But Pyxus' financial results primarily related to its core business of providing tobacco leaf to cigarette makers. Investors are much more excited about the company's moves into cannabis products.
Pyxus especially highlighted the launch of its new line of hemp-based cannabidiol (CBD) products under the Korent brand. The company's hemp-focused joint venture, Criticality, has worked to make Korent available online and through specialty channels.
Hemp-based CBD could present a great growth opportunity for Pyxus. The U.S. just legalized hemp in December. Estimates vary over how big the market could be, but cannabis market research company Brightfield Group projects that U.S. hemp CBD sales could reach $22 billion by 2022.
Pyxus now has to deliver. The company's strategy of diversifying into cannabis could pay off over the long run, but there's a long way to go.
In the meantime, expect significant volatility with Pyxus stock. Shares have more than doubled so far in 2019 based primarily on lofty expectations centered in large part on the company's cannabis opportunities. For Pyxus' momentum to continue, those expectations must be turned into reality.
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