Should You Buy the Dip in HEXO Stock?

HEXO (TSX:HEXO)(NASDAQ:HEXO) is an Ottawa-based company that produces, markets, and sells cannabis in Canada. Its shares have dropped 36% in 2021 as of close on August 25. The stock was pushed into the red over the past month as investors responded negatively to recent events.

Today, I want to explore whether it is worth buying the dip in HEXO.

The company released its third-quarter fiscal 2021 results on June 14. Total net sales rose 2% from the prior year. HEXO has risen to prominence on the back of its cannabis-infused beverage offerings. It gained traction due to its partnership with Molson Canada. This summer, it aimed to launch six additional products.

Truss, the cannabis-infused beverage product line, has bolstered its dominant market share in this space over the past year. However, adjusted EBITDA was down marginally from the previous quarter. Investors can expect to see HEXO’s fourth quarter and full-year 2021 results in late October.

HEXO’s stock took a tumble after it announced a $140-million public offering at a price of $2.95 U.S. per unit. Like its peers, the company has sought to raise more cash in a bid to further penetrate the global cannabis market. It also has its eyes on asset in California, a monster cannabis market in the United States.

A share dilution is rarely a popular moment, which explains the flight from HEXO over the past month. However, investors should not be ready to abandon HEXO. It still boasts the largest market share in one of the fastest-growing consumer spaces for the cannabis sector. The stock last had an RSI of 22, putting HEXO well into technically oversold territory.