Why is the Cannabis Sector Collapsing Today?

Ahead of the opening bell today, HEXO (NYSE:HEXO) rolled out a preliminary peek at its fiscal fourth-quarter revenue, and investors are none too happy with the pot company’s quarterly performance. As a result, HEXO’s shares kicked the day’s trading session down by a whopping 21% on sky-high volume. As of 9:54 a.m. EDT, HEXO’s shares were still down by 19% in the wake of this disappointing financial update…

So what

There are two big issues weighing on HEXO’s shares this morning. First off, this preliminary revenue projection falls well short of where the company guided investors during its last earnings release. During its fiscal third-quarter earnings report, for instance, the company said that it expected fiscal fourth-quarter net revenues to “approximately double those of the current quarter.”

Wall Street was thus expecting total net revenues for the current quarter to come in at around CA$26 million based on the company’s prior guidance. HEXO’s updated figures, however, have Q4 sales ranging from a low of CA$14.5 million to a high of CA$16.5 million for the three-month period.

Secondly, HEXO decided to rescind its financial outlook for fiscal 2020, citing the ongoing regulatory uncertainties across the pan-Canadian system and slower-than-expected store openings as key reasons for pulling its annual guidance today.

Now what

Marijuana investors certainly didn’t need any more reasons to be nervous about the industry’s near-term outlook. After all…

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