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.
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.
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.
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.