Fri. Oct 18th, 2019

Hexo shares fall again as GMP downgrades stock to hold from buy after revenue warning

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Hexo Corp. shares

HEXO, -22.55%

HEXO, -22.95%

fell 0.7% in premarket trade Friday, after GMP downgraded the stock to hold from buy after the company issued a revenue warning on Thursday that sent U.S.-listed shares down 23% to mark their worst ever one-day percentage decline. The Canadian cannabis company warned of a fiscal fourth-quarter revenue shortfall, citing “lower than expected product sell through.” The company said it was also withdrawing its fiscal 2020 financial outlook, as “regulatory uncertainty” and jurisdictional decisions to limit the availability and types of cannabis derivative products have led to an “increased level of unpredictability.” GMP analyst Robert Fagan said the warning suggested that the company’s product assortment was not well matched to consumer demand. “While we expected risks to FY20 sales guidance, with the Q4 reduction, HEXO has now missed consensus for two quarters, notably in opposition to the company’s track record of good execution,” Fagan wrote in a note to clients. “We are also concerned with HEXO’s need to rework its sales strategy which could take time to perfect.” The analyst cut his stock price target to C$4.00 ($3.00) from C$9.50. Hexo shares have fallen 45% in the last three months, while the ETFMG Alternative Harvest ETF

MJ, -5.94%

has fallen 39% and the S&P 500

SPX, +0.64%

has fallen 2%.

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