Canada’s biggest licensed cannabis producers currently have a stranglehold on the country’s regulated recreational market place just 4 months into legalization, according to analysts.
Canaccord Genuity estimates Canopy Development and Aurora Cannabis combined represented nearly 50% of the sales volume in the 1st 3 months of legalization.
“After which includes estimated contributions from Tilray and Aphria, we think the top rated 4 (licensed producers) in the space could finish up representing upwards of 70% of recreational volumes in the business out of the gate,” Canaccord analyst Matt Bottomley wrote in a note to investors.
That dominance will prompt fierce competitors for the remaining 30% of the market place with extra than 100 businesses currently licensed and yet another 840 in the licensing pipeline – plus new micro-cultivators later this year and licensed outside production getting into the market place in the fall.
New market place possibilities will exist when regulations for edible cannabis, extracts and topicals come into force later this year.
CIBC Planet Markets, a subsidiary of the Canadian Imperial Bank of Commerce, expects earnings just before interest, tax, depreciation and amortization (EBITDA) for Canadian cannabis businesses in 2020 to attain roughly 1.two billion Canadian dollars ($910 million).
But profitability for Canopy Development, Aurora, Aphria and Tilray may perhaps be additional down the line, according to Canaccord’s Bottomley.
“As we head into (calendar year) 2019, we anticipate producers to trend towards profitability … we think EBITDA constructive outcomes could nevertheless be quite a few quarters away in most circumstances,” he wrote.
A quantity of trends will play out in the business in the coming months, Bottomley stated, which includes:
- Achievable investments from classic businesses that continue to circle the space.
- Much more Canadian licensed producers securing key U.S. listings (CannTrust shares will start off trading on the New York Stock Exchange Feb. 25).
- The rollout of brick-and-mortar recreational retailers will continue (and Ontario will get its 1st retailers).
- Regulations go reside in 2019 for edibles, extracts and topicals.
- Mergers and acquisitions will continue to be a key story in 2019.
Matt Lamers can be reached at [email protected]
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