What happened

Shares of HEXO (NYSE:HEXO) (TSX:HEXO) were jumping 6% higher as of 3:34 p.m. EDT on Monday after rising as much as 8.2% earlier in the day. The nice gain came after BMO Capital analyst Tammy Chen upgraded the marijuana stock to "market perform" from "underperform." Chen also assigned a price target of $1.30 Canadian (US$0.95), roughly 34% above HEXO's closing price on Friday.

So what

Is HEXO a better pick merely because one analyst is more bullish about the stock? No. However, it's smart for investors to understand the reasons behind analysts' optimism.

Cannabis leaf stuck in straw in a green bottle

Image source: Getty Images.

HEXO announced better-than-expected results earlier this month for its fiscal 2020 third quarter. The company's launch of its value cannabis brand Original Stash has been a success. 

In addition, HEXO has delivered more good news in recent weeks. It received a license extension for its Belleville, Ontario, facility that allows the sale of a wide range of products, notably including edibles and cannabis-infused beverages. HEXO completed the sale of its Niagara facility for CA$10.25 million. And it launched a larger-sized version of its Tsunami product in the Canadian medical cannabis market. 

Now what

HEXO's positive developments won't mean much if the company can't make significant progress toward achieving profitability. However, the company thinks it will generate positive adjusted EBITDA in the first half of fiscal 2021. HEXO also hopes to expand into the U.S. hemp-derived CBD beverage market with partner Molson Coors.

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.