Please ensure Javascript is enabled for purposes of website accessibility

Why HEXO Shares Soared 18.9% Today

By Keith Speights - Feb 14, 2020 at 3:25PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Great quarterly results for the biggest Canadian cannabis producer generated enthusiasm about HEXO's prospects.

What happened

Shares of HEXO (HEXO 5.87%) soared 18.9% on Friday on the coattails of Canopy Growth's (CGC 4.72%) positive fiscal 2020 third-quarter update. Canopy announced better-than-expected top- and bottom-line fiscal 2020 Q3 results before the market opened on Friday.

So what

Quite a few Canadian marijuana stocks received boosts from Canopy's strong Q3 update. The big cannabis producer's impressive quarter-over-quarter revenue growth increased optimism about the entire Canadian cannabis industry's prospects.

Two hands holding two cannabis leaves with a blue sky in the background

Image source: Getty Images.

Canopy Growth attributed its revenue growth in large part to the opening of around 140 retail cannabis stores throughout Canada in the third quarter. This improvement in the retail environment is a tailwind for other cannabis producers, including HEXO.

But why did HEXO stock perform better than most of its peers and even better than Canopy Growth itself? The most likely reason is that HEXO's share price has plunged more than most other Canadian pot stocks over the last six months. A bigger decline could have led to a bigger bounce.

Now what

Sympathy moves like what was seen with HEXO today often fade pretty quickly. HEXO should announce its own quarterly results in March. For its momentum to continue, the company will need to demonstrate strong revenue growth and a focus on fiscal discipline like Canopy Growth did with its latest results.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

HEXO Stock Quote
HEXO
HEXO
$0.24 (5.87%) $0.01
Canopy Growth Stock Quote
Canopy Growth
CGC
$3.77 (4.72%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.