Underdog cannabis stock HEXO Corp. could be undervalued

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HEXO has big expansion plans that might not factor into its current stock value

The cannabis stock Hexo Corp TSE: HEXO is significantly smaller than leading stocks in the sector such as Tilray, Canopy Growth, and Aurora Cannabis. Its stock price took a dive this month along with the rest of the sector, but some analysts say the underdog is now undervalued.

HEXO holds down a valuable corner of the Canadian market through an agreement with Quebec to run the processing and distribution of recreational marijuana orders for the province. The company is partnered with the government’s website, and though it got off to a rocky start with supply shortages it is positioned very well.

HEXO is also riding the cannabis-infused drink wave through a high profile partnership with Molson Coors Canada. The partnership was first announced in August, following a similar deal between Canopy Growth and Constellation Brands.

The company is internationally competitive as well. HEXO still has strong ties to the medical marijuana industry and has made a partnership for a large medical cannabis growing facility in Greece. The facility will primarily serve the European markets.

This month, HEXO’s stock dropped from around $9 per share to $5.30. While their business is still much smaller than sector leaders like Canopy Growth, HEXO is on a path to rapid growth with far less risk. Their current production capacity of 300,000 square feet will soon expand to more than 1 million square feet.

Additionally, HEXO purchased a stake of a two million square foot development and distribution hub for alternati9ve cannabis products in Ontario. Depending on how the value is calculated, say, analysts, the extent of HEXO’s upcoming expansion could outweigh its current stock valuation.