Article by Vanmala Subramaniam, Financial Post
Soaring expectations for Canada’s cannabis industry are being tempered in some quarters after licensed producers reported what for the most part were underwhelming financial results in the first post-legalization period.
Over the past few months, the biggest cannabis companies in the country — Canopy Growth Corp., Tilray Inc., Aurora Cannabis Inc., Aphria Inc., Cronos Group and CannTrust Holdings Inc. — have been reporting earnings reflecting the early months of recreational sales, presenting the first picture of the state of the market across the country. In some cases, the sales figures were microscopic in relation to the valuations the companies are carrying.
“Sales and revenues have been absolutely horrible post-legalization,” Jason Zandberg, a special situations analyst at PI Financial, told the Financial Post in a recent interview. “Clearly the market is overpriced and many of these companies have gotten ahead of themselves in valuations.”
According to data from Statistics Canada, just $307 million of legal weed has been sold in the last three months of 2018 for both adult-use and medical consumption post-legalization, versus $1.17 billion in sales from the black market. Legal sales to date are far below many pre-legalization forecasts, including a widely-cited report from Deloitte released in mid-2018 that predicted recreational sales alone could generate up to $4.34 billion in 2019.
This week, cannabis industry research firm BDS Analytics also cut its forecast on the expected growth of Canada’s pot market, reducing its target and extending the time frame it will take to get there.
The firm now expects the Canadian cannabis industry to grow to US$5.2 billion by 2024, whereas in January it had forecast that the industry would be worth US$5.9 billion by 2022.