The growth thesis for Canadian cannabis stocks certainly hasn’t played out the way investors had hoped in 2020. One of the biggest headwinds legal producers have faced this year is extreme price deflation in the Canadian market.
Flower Prices Falling: Canadian flower prices are down 33% since mid-2019, according to Cantor Fitzgerald analyst Pablo Zuanic.
Zuanic said his price deflation has been a major drag on LPs that are heavily reliant on flower, including Aurora Cannabis Inc (NYSE: ACB) and Canopy Growth Corp (NYSE: CGC).
While price deflation is not a reason to avoid LPs all together, Zuanic said investors need to continue to be selective in the space.
“Net, top down, we think there are reasons to remain cautious on the Canadian LPs (recent strength is explained by expected collateral effects from further US deregulation; although whether these companies have the funds/platforms to benefit varies by LP),” he wrote in a note.
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