Shares of medical cannabis producer Hexo (HEXO - Get Report) dropped on Tuesday after the company received a downgrade from Oppenheimer on what the research firm believes is greater gross margin pressure than initially expected.
In a research note to clients, Oppenheimer analyst Rupesh Parikh said he was downgrading the stock to perform from outperform mainly because he now sees the shares as more fairly valued following the company's acquisition of Newstrike Brands.
Hexo acquired Newstrike Brands in March in an all-stock deal valued at roughly C$263 million ($197 million).
"Although we are stepping to the sidelines, we still see many positives to the HEXO story longer term and believe the name should remain on the radar for investors," Pariksh said.
Shares of Hexo were down 6.26% to $5.24 in trading on Tuesday.