Pot stocks took a tremendous beating in 2019, and most kicked off 2020 trading on Thursday at prices near their 52-week lows. HEXO (NASDAQ:HEXO), a top Quebec-based cannabis grower and distributor, is a prime example.

After its landmark acquisition of Newstrike Brands, which catapulted HEXO's shares to an all-time high in May, the stock abruptly reversed course during the early days of summer. The pot titan's shares went on to lose a whopping 80% of their value over the final seven months of 2019. 

A crop of marijuana growing outdoors.

Image Source: Getty Images.

The question for bargain hunters, then, is whether or not they should  take advantage of this protracted downturn to invest in the company now.

How will HEXO fare?

The name of the game for HEXO in 2020 is the same as it is for nearly all pot companies: Simply survive the year. Canada's legal cannabis market has been developing at a snail's pace, and that slower-than-anticipated growth has had a dire impact on the industry as a whole. 

HEXO, for example, was forced to withdraw its 2020 financial guidance, lay off workers, idle key marijuana growth facilities, and tap the public markets for funds. Adding to the company's woes, its CFO Michael Monahan -- who had been on the job for less than five months -- resigned seemingly out of the blue in October. Suffice it to say, HEXO is struggling with a host of external and internal headwinds. 

Can the company adapt and overcome? On the bright side, HEXO's recent decision to raise $25 million through a direct stock offering should give it the leeway necessary to get through the year. That's a big deal because the Canadian legal cannabis market should make major strides over the course of 2020, and develop into a far more lucrative space in the years ahead.

For example, it's expected that there will be a nice jump in the number of Canadian brick-and-mortar locations retailing cannabis products in 2020, and the second wave of legalization -- dubbed Cannabis 2.0 -- will bring a wide array of cannabis derivative options such as drinks, edibles, and vapes to market.

This should provide a considerable boost to both profit margins and overall revenues industrywide. HEXO, for its part, stands to benefit immensely from Cannabis 2.0 by virtue of the cannabis-infused drinks it has developed in a joint-venture with alcoholic beverage giant Molson Coors.  

On the flip side, HEXO's shares are now dangerously close to the minimum bid requirement for trading on the New York Stock Exchange. If the company can't convince retail investors to stay the course during this trough period, it might face a de-listing notice at some point this year.  

Time to buy? 

Unfortunately, HEXO's stock probably hasn't hit rock bottom quite yet. While it might enjoy a bounce as day traders swap shares during the first few weeks of 2020, the company's near-term outlook simply doesn't paint an encouraging picture.

As things stand now, HEXO appears to be two fiscal years away from turning a profit on a consistent basis -- despite the full-scale legalization of high-margin derivative products in Canada. So unless it can attract a deep-pocketed partner to support it through the rough period as its industry slowly matures, there's a good chance that by year's end, management will be exploring ways to just keep the stock listed on the NYSE. Stated bluntly, investors may want to watch this speculative pot stock from the safety of the sidelines in 2020. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.