A year after Canada legalized use of recreational marijuana cannabis stocks have...
- A year after Canada legalized use of recreational marijuana cannabis stocks have lost half their market value, and investors betting that the launch of higher-margin pot-infused drinks and other products will quickly lift shares may be in for a bumpy ride.
Share prices in the Horizons Marijuana Life Sciences Index ETF have slumped as companies’ revenues missed expectations. Cannabis producers, investors and analysts have blamed Canadian regulations that have slowed the opening of new retail outlets, strangled sales and imposed higher costs. “We would probably give the first year a C minus,” said Seaport Global analyst Brett Hundley, giving the industry performance a barely passing grade. The slow roll-out of stores “creates a real problem for Canadian licensed producers, because they’ve expanded rapidly with cultivation and production facilities and have nowhere to go,” he added. Lackluster results from cannabis producers “will continue and potentially worsen,” Hundley cautioned.
With each province responsible for its own retail rules and taxes, the fragmented approach to regulating the industry will continue to raise costs and create distortions in the market, Greer said.One such distortion is evident in prices, with consumer paying far higher prices for legal weed, according to industry experts.
“Now, this year these companies are coming more under the microscope by investors and people are saying, ‘hey, when are you going to start making money?’” said Andrew Kessner, analyst at William O’Neill & Co. FILE PHOTO: A man walks past a sign outside the Natural Vibe store after legal recreational marijuana went on sale in St John's, Newfoundland and Labrador, Canada October 17, 2018. REUTERS/Chris Wattie
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