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Why Did HEXO Rise 17% on Thursday?

Hexo (HEXO) had a hard time last week. A lot of headwinds pulled the stock down. However, Cannabis 2.0 is bringing cannabis stocks back to life. Hexo stock rose and closed with a gain of 17% on Thursday. Let’s see why.

Hexo to launch CBD-infused drinks

Canada legalized edibles, vapes, beverages, and topicals on Thursday. The Canadian Press reported that Hexo and Molson Coors’ joint venture called “Truss Beverage Company” announced that cannabis-infused beverages will launch later this year. The beverage portfolio will include CBD-infused spring water and beverages containing THC (tetrahydrocannabinol). The CBD-infused spring water will launch along with a partnership with  Flow Alkaline Spring Water.

More research is needed on beverages containing THC to understand the effects. THC is cannabis’s psychoactive compound that causes the “high.” As a result, companies need to understand the pros and cons before including the compound in cannabis drinks.

Truss Chief Executive Brett Vye said, “We’ve been at this for quite a while now, and we feel very confident and very excited about the THC products we will be launching.”

Hexo’s beverage products 

Truss Beverage announced that the following products will be launched:

  • There will be six cannabis beverage brands.
  • One of the products will be CBD-infused flavored spring water called “Flow Glow.”
  • Flow Glow will come in goji and grapefruit as well as raspberry and lemon flavors containing 10 milligrams of CBD each.

Truss Beverage’s management thinks that cannabis-infused drinks could capture 10%–20% of the overall marijuana market in Canada. The company didn’t discuss the products’ exact launch date.

Other cannabis companies’ beverage plans 

Tilray (TLRY) and Anheuser-Busch InBev’s joint venture company called “Fluent Beverage” discussed its portfolio of cannabis drinks. The company will launch CBD-infused drinks in December. However, Fluent Beverage Chief Executive Jorn Socquet said that the company needs more time to develop beverages containing THC. Meanwhile, Tilray is stuck in scandal news. Read Cannabis Scandal Radar: Is Tilray Next? to learn more.

Canopy Growth (CGC) (WEED) will also launch cannabis-infused drinks with its largest shareholder Constellation Brand (STZ). Canopy Growth plans to expand into the nutritional beverage market through its acquisition with BioSteel Nutrition.

Challenges in the US

CBD and THC products could be a long shot for the US market. The FDA is hesitant about CBD being used in products. Notably, the FDA issued warning letters to Curaleaf (CURLF) for some of its CBD-based products. We doubt that the FDA will allow THC to be an ingredient in products. However, cannabis companies could target state markets where recreational marijuana is legal. Florida is stepping up its legalization process faster than other states through campaigns by voters. Close to 57% of President Trump’s voters are moving ahead to make cannabis legal in Florida.

Cannabis companies’ performance

Hexo started the month with the news that its chief financial officer resigned. The news prompted Bank of America Merrill Lynch to double-downgrade Hexo stock. Later, Hexo withdrew its fiscal 2020 outlook. The company also reported preliminary fourth-quarter results. Overall, the results implied that the company will report lower revenues. These factors pulled the stock down to 37.6% last week.

Thursday was a good day for most cannabis stocks after Canada legalized edibles. Cronos Group (CRON) rose 5.4%. The company plans to expand its vaping business after the second phase of legalization. Cronos Group stock rose 33% in after-hours trading on Wednesday. The company announced that it will be listing its stock on the Australian Securities Exchange next month. Cronos Group will also expand in the Australia market. To learn more, read Why Cronos Rose 33% in After-Hours Trading on Wednesday. Canopy Growth, Aurora Cannabis (ACB), and OrganiGram (OGI) stock also rose 5.2%, 7.7%, and 8.4%, on Thursday.

For more analysts’ updates, visit our Word on the Street page.

For more cannabis-related news and updates, visit 420 Investor Daily.

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