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Challenging Market Conditions Hurt Halo Collective’s Q2 Performance
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Challenging Market Conditions Hurt Halo Collective’s Q2 Performance

Story Highlights

Canadian cannabis products maker Halo Collective’s gross margin jumped in the second quarter despite a fall in revenues.

Cannabis products maker Halo Collective Inc. (TSE: HALO) has reported weak results for the second quarter of 2022, due to challenging market conditions.

What Is Halo Collective?

Headquartered in the Canadian province of British Columbia, Halo Collective’s operations cover the complete value chain of cannabis production. The company cultivates, extracts, produces and sells cannabis flowers, concentrates, edibles, vape carts, and pre-rolls. Its brands include Budega, Winberry Farms, and Hush.

A Snapshot of HALO’s Q2 Results

Revenue: Revenues declined 24.8% year-over-year to $6.9 million as a result of the economic downturn in Oregon and California. Total sales slipped 59.4% to two million grams.

Gross profit: Gross profit stood at $2.1 million, compared to $2.2 million in the second quarter of last year. However, the gross margin increased to 31.9% from 24.1% in the previous year.

Adjusted EBITDA: Adjusted EBITDA loss amounted to $4.1 million, narrower than the loss of $4.4 million a year ago.

Cash & debt: The company ended the quarter with unrestricted cash of $1.6 million and repaid debt worth $7.7 million.

The Executive Chairman and CEO of Halo Collective, Katie Field, said, “During the quarter, we ramped up efforts in our brand sales business, specifically Hush and Budega which are resonating with West Coast consumers and continued the retail rollout in Los Angeles where we opened the second of three planned dispensaries. Meanwhile, we de-emphasized other areas such as bulk wholesale flower and trimmed sales which generated good revenue but yielded lower profitability.”

Is Halo Collective a Good Stock?

On TipRanks, the stock has a Moderate Buy consensus rating based on a single Buy. However, the analyst did not provide a price target.

Corporate insiders, too, look cautious. They have sold HALO shares worth C$27,600 in the last three months. TipRanks’ Insider Trading Activity tool shows that Insider Confidence Signal is currently Neutral for Halo Collective.

What’s Ahead for Halo Collective?

The company has opened two Budega dispensaries in Los Angeles this year. Further, it plans to open a flagship store in Hollywood in the third quarter. These stores will help Halo Collective boost awareness and distribution of cannabis products in California.

Even though the current market conditions are not favorable for the company, it is on track for long-term growth. It is expanding its presence in the wellness and health segments through acquisitions. Additionally, Halo Collective has purchased numerous software development assets, with the aim of reorganizing them into a subsidiary.

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