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Why HEXO Shares Burned Almost 6% Brighter on Thursday

By Eric Volkman – Jun 4, 2020 at 6:34PM

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A new version of a medical marijuana product, plus positive news on the derivatives front, has boosted investor confidence in the cannabis company.

What happened

On Thursday, for the second time in three days, HEXO (HEXO 0.18%) delivered a piece of good news. The Canada-based marijuana company announced a large-sized (30 gram) version of its Tsunami cannabis flower. Tsunami is a medical marijuana product, and that segment is more lucrative than the more competitive recreational market.

So what

HEXO is having a good week. Its unveiling of the larger Tsunami packet came just two days after the company announced that its main production and processing facility had received a crucial license extension. The combination of both has fired up investor optimism on the company's prospects.

A marijuana flower burning.

Image source: Getty Images.

The extension allows HEXO to sell a very wide range of products from the Belleville facility, including but not limited to edibles, dried cannabis flower, and topicals.

Perhaps most crucially, the extension also permits the sale of cannabis-infused beverages from there. HEXO is developing and marketing these in the Truss joint venture it has established with Molson Coors.

The market for derivatives in Canada is still very new and remains a prize for the taking -- the country's so-called "Cannabis 2.0" phase of legalization for such products kicked in last October.

Now what

Now that HEXO is free to sell key derivative products from Belleville and is expanding its medical marijuana product range, investor eyes will be on the company to see how it executes on its opportunities. With a slowly opening global and domestic economy, HEXO seems to have timing on its side just now.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.

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