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Why HEXO Shares Soared 18.9% Today

What happened

Shares of HEXO (NYSE: HEXO) soared 18.9% on Friday on the coattails of Canopy Growth's (NYSE: CGC) positive fiscal 2020 third-quarter update. Canopy announced better-than-expected top- and bottom-line fiscal 2020 Q3 results before the market opened on Friday.

So what

Quite a few Canadian marijuana stocks received boosts from Canopy's strong Q3 update. The big cannabis producer's impressive quarter-over-quarter revenue growth increased optimism about the entire Canadian cannabis industry's prospects.

Image source: Getty Images.

Canopy Growth attributed its revenue growth in large part to the opening of around 140 retail cannabis stores throughout Canada in the third quarter. This improvement in the retail environment is a tailwind for other cannabis producers, including HEXO.

But why did HEXO stock perform better than most of its peers and even better than Canopy Growth itself? The most likely reason is that HEXO's share price has plunged more than most other Canadian pot stocks over the last six months. A bigger decline could have led to a bigger bounce.

Now what

Sympathy moves like what was seen with HEXO today often fade pretty quickly. HEXO should announce its own quarterly results in March. For its momentum to continue, the company will need to demonstrate strong revenue growth and a focus on fiscal discipline like Canopy Growth did with its latest results.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.


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