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Both Aurora Cannabis (NYSE: ACB) and Hexo Corp. (NASDAQOTH: HYYDF), formerly Hydropothecary, offers investors a rollercoaster ride so far in 2018. Hexo's shareholders have probably appreciated this activity more. The marijuana stock rose nearly 45% after doubling earlier in the year, while Aurora Cannabis is down more than 15% since the beginning of the year.
Which of these securities is best able to generate more highs than lows for investors in the future? This is how Aurora Cannabis and Hexo compare.
Source of the image: Getty Images.
The Aurora Cannabis Case
Some predict that the global marijuana market will exceed $ 100 billion – and perhaps more than that – in the next 10 to 15 years. If they are right, the winners in this market will have an extraordinary ability to meet the demand and distribution channels around the world. Aurora Cannabis already ticks both boxes.
Thanks to its many vertiginous acquisitions, Aurora Cannabis hopes to be able to produce 150,000 kilograms of cannabis on an annual basis at the beginning of next year. The company's total annual production capacity is expected to increase to more than 500,000 kilograms. By achieving this goal, Aurora will become the world's largest marijuana producer in terms of capacity.
Aurora's distribution channels begin at home in Canada. The company holds the largest share of the Canadian medical cannabis market, with partners such as CannaMedical and Shoppers Drug Mart. Aurora has entered into supply agreements for the recreational marijuana market with 12 provinces and territories. He also acquired a stake in the largest liquor retailer alcanna, the two companies have partnered to launch cannabis retail stores in Canada.
Even though it is still early for the Canadian market for recreational marijuana, Aurora seems to be a big winner so far. The four best-selling brands in British Columbia are owned by the company. Aurora also estimates that its products generated approximately 30% of total sales in Ontario during the first few weeks of the province's recreational marijuana launch.
But it is the international marijuana markets that represent the greatest opportunity for Aurora Cannabis. The company boasts the largest market share in Germany, the largest marijuana market outside of North America. It is the only producer authorized to sell medical cannabis in Italy and the first to export medical cannabis to Denmark.
The acquisition of ICC Labs by Aurora expands its operations in Latin America. ICC holds about 70% of the market in Uruguay, the first country to legalize marijuana for recreational purposes. She also holds export licenses for medical cannabis products in Colombia and Mexico.
The case for Hexo
Hexo is not as big as Aurora Cannabis, but it's still pretty good in terms of capacity. The company is expected to be able to produce 108,000 kilograms of cannabis by the end of 2018. Reaching this level will temporarily place Hexo as the fourth largest marijuana producer, although, if other companies develop their capacity , Hexo may slip a little less in the rankings.
And while Aurora is doing well in other provinces, Hexo reigns in its original province, Quebec. The company signed a major deal with Quebec in April, giving it a 35% market share in the province's recreational marijuana market. It was the largest forward supply contract in the history of the cannabis industry.
Quebec is not the only province where Hexo sells its recreational marijuana products. Hexo has supply channels in four other provinces and plans to add another to the list. More importantly, the company has been included as a supplier of the Ontario Marijuana Market for recreational purposes.
Hexo is one of only two Canadian marijuana growers to be selected as a partner by a major liquor company. Molson Coors Brewery has chosen Hexo as a partner to develop cannabis-based beverages for the Canadian food market, which is expected to open late next year.
But what about the global marijuana market? Hexo is behind some of its biggest rivals on the international scene. However, the company expects to expand into markets outside Canada starting next year. Hexo said it has "given priority to preliminary talks" with Colombia and Greece on cannabis production in these countries.
Best marijuana stock
Aurora's market capitalization, which is close to $ 6 billion, is more than six times the market capitalization of Hexo. However, Aurora Cannabis also has a much larger capacity and larger sales than Hexo's.
In addition, Aurora's prospects look better. The company already has solid businesses around the world, unlike Hexo. Because of this, I think that Aurora Cannabis is considered the best stock of marijuana.
But even though I like Aurora better than Hexo, I'm not sold to Aurora as an excellent choice for investors. I think it will take longer to grow the business to justify its valuation than many people think. My view is that there are other stocks offering more attractive risk / reward profiles for investors to profit from the growth of the cannabis industry.
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