In late 2019, the landscape of Canada’s recreational and medical cannabis industry changed with the legalization of cannabis derivative products (i.e. concentrates, edibles, vape pens, and more). The legalization of these products represented a major milestone for the Canadian cannabis industry and many analysts have referred to the change as cannabis 2.0.
So far this year, we have seen a substantial increase in the amount and the type of cannabis 2.0 products that are being sold and this is a trend that we are bullish on. In the US, edibles and vape pens represent a major part of the cannabis market and we expect to see a similar trend in Canada.
When we are analyzing Canadian companies that are capitalizing on the cannabis 2.0 market, we are looking for businesses that possess certain traits. Some of the factors that impact our analysis include the following:
- The strength of the management team
- The amount of distribution in place
- The amount of product that can be produced
- The amount of capital that has been set aside to support growth
HEXO Corp (HEXO.TO) (HEXO) is a Canadian company that is levered to the cannabis 2.0 market and is an opportunity that we continue to keep an eye on. Although the Canadian cannabis producer has been slow to execute on previously announced growth initiatives, the recent developments that have been reported by the company have been substantial.
Going forward, the name of the game for HEXO is execution and we will monitor how it can capitalize on the 2.0 market in Canada and international cannabis markets. Earlier this month, the company formed a strategic partnership with Breath of Life (BOL) to capitalize on the Israeli cannabis market and this represents an attractive aspect of the story.
Last week, HEXO announced a milestone and reported to have launched its line of vape products to both recreational and medical consumers. By focusing on the recreational market, HEXO will be able to target a large number of potential customers and will monitor how the product line is able to gain traction.
We expect the back half of 2020 to be a transformational time for the Canadian cannabis producer. If the company is not able to raise the stock price above the $1 level, it will most likely be forced to complete a reverse stock split or be de-listed from the New York Stock Exchange (NYSE). We continue to remain cautiously optimistic with HEXO and will monitor how the story evolves from here.
If you are interested in learning more about the Canadian cannabis company, please send an email to email@example.com to be added to our distribution list.