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Last week, a few high-profile Canadian cannabis retailers reported quarterly financial results and recorded strong growth when compared to the same period last year.
Although the earnings reports reported impressive growth statistics in quarterly financial reports, the market responded negatively, and we are closely following this sub-sector of the industry.
From high taxes and industry saturation, we believe the Canadian cannabis retail vertical has been impacted by a variety of factors. Despite there being a significant increase in the number of cannabis dispensaries in Canada, many retailers are reporting large net losses, and this is a trend that is not expected to charge in the near-term.
Canada’s cannabis industry has been dealing with a supply-demand imbalance which has resulted in a substantial decrease in the average price per cannabis product. The imbalance has especially impacted Canadian Licensed Producers (LPs) and cannabis retailers. We do not expect to see a trend shift until international markets become a more significant opportunity for Canadian operators.
Several Canadian LPs and cannabis retailers have set their sights the United States (US) and we expect any legislation reform to be a major catalyst for the entire cannabis sector. We believe that Canadian firms which own or have the right to own major US cannabis assets are well positioned to combat the issues with the Canadian market.
Although we are bullish on the US market, we believe that several high-profile Canadian operators will no longer be in business by that time. In the back half of the year, we expect to see significant consolidation in the cannabis industry. We are of the opinion that the companies that do not adapt to the current market environment are more likely to go out of business and our readers should be aware of this.
If you are interested in learning more about the Canadian cannabis sector, please send an email to support@technical420.com with the subject “Canadian Cannabis Selloff” to be added to our distribution list.
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