Canadian marijuana stocks climbed steeply between October and January as investors piled in in anticipation of a sales surge when the country legalizes adult use this year. But government delays, stringent packaging and distribution rules, limited product choices and high valuations have dampened investors’ enthusiasm, analysts said.
Canada’s Horizons Marijuana Life Sciences exchange-traded fund (ETF) has slumped 45 per cent since its January peak. The U.S.-listed ETFMG Alternative Harvest ETF, which began trading on Dec. 26, is down 32 per cent from its high, just a hair above a record low on April 4.
“Licensed producer power won’t be quite the same in the post-medical (marijuana) world,” said Alan Brochstein, founder of cannabis-sector information provider 420 Investor. “They’ll be the suppliers, but they won’t capture the whole retail margin. And the packaging is … kind of a retardant to the growth of the market.”
Jason Zandberg, a research analyst at PI Financial, predicted 2019 sales may be lower than expected, in part due to initial shortages and slow consumer conversion from the illegal market.