Delays Up North: What it Means for Marijuana Stocks

Everyone hoped the Canadian public safety minister’s words, spoken early this month – that the impending date for Canada’s nationwide legalization of recreational weed was “on track and on time” – would prove accurate.

Unfortunately, it now appears his hopeful statement was neither timely or on track. The new projection for legalization has been shifted at least one month later, toward the end of the summer.

Upon reception of this news from the Canadian government, Canada’s marijuana stocks dropped.

So, let’s take a look at the impact – both the bad and good news – of Canada’s delay in legalization upon these marijuana stocks in Canada.

First, the bad news for marijuana stocks investors in Canada.

The original date that Canadians were looking forward to for legal purchase of recreational cannabis was sometime in July. Last week, however, Canadian health minister Ginette Petitpas Taylor stirred anxiety with her statement of this date not being feasible – the issue arising from lack of readiness on a provincial rather than national level.

On the national end, the Canadian Senate is not only on track to vote on the bill that would authorize this legalization – by June 7 – but it also looks like all the votes are in place for its approval. Once the bill is passed, as is assumed it will, a royal assent will likely follow quickly.

This is certainly good news for marijuana stocks to invest in 2018.

But on the provincial end, Petitpas Taylor estimates provinces and territories still face 8 to 12 weeks of preparation before retail sales can get up and running, pushing the date to the beginning of August at the earliest; potentially September. All of the provinces and territories will share the same start date for legal sales, meaning a delay for one could mean a delay for all.

It’s not difficult to see why all of Canada’s major marijuana stocks dropped following this news. MedReleaf (NASDAQOTH:MEDFF) stock fell 8%; both Aurora Cannabis (NASDAQOTH:ACBFF) and Aphria (NASDAQOTH:APHQF) stocks dropped 7%; Canopy Growth (NASDAQOTH:TWMJF) stock slipped nearly 6%.

A wide range of estimates for Canada’s recreational marijuana market have placed its annual value between $4.2 billion and $12 billion. But a modest prediction for the damage even a delay of one month could inflict upon the Canadian cannabis industry in lost sales is around $350 million. Worst-case scenario, a loss of $2 billion on the highest end of predictions.

Where is the good news in this delay for industry players and marijuana stocks investors?

The most important thing to keep in mind is that this delay resembles more a speed bump than a roadblock.

Nationally speaking, there is no indication the country’s legislators will lack in votes to legalize marijuana, even considering the few in legislative chambers who oppose its legalization.

Though a start date of July would have been preferred all around by growers, the upside is they have just bought themselves additional time to finalize their operations for retail sales. The tone across Canada’s major industry players has been of frantic expansion, setting out to increase production capacity and retail capabilities in time to meet the expected high recreational use demand.

One of the highest profile examples of this was Aurora Cannabis’ purchase of a 19.9% stake in Liquor Stores N.A. Ltd. This strategic move gives Aurora access to Liquor Stores’ 231 retail locations across Alberta, as well as guaranteeing the opening of additional cannabis-only retail stores to sell their cannabis products on the recreational market.

One of the best marijuana stocks to invest in, Canopy Growth, has also been busily at work to secure retail and supply arrangements throughout provinces whose frameworks are in place to move forward once recreational marijuana is legal.

A recent bid to handle retail stores in the province of Manitoba, added to a previous agreement with Newfoundland and Labrador, reflect more of the company’s retail readiness.

And Aurora and Canopy are not the only marijuana stocks available that are securing provincial retail agreements. Aphria and MedReleaf have also secured deals as marijuana suppliers for Quebec’s retail market. And MedReleaf recently launched the first of its recreational cannabis brands, San Rafael ’71.

The best piece of news for marijuana stocks investors in Canada’s delay of legalization is that the stocks are less expensive. 

Buying marijuana stocks now while they dip may be a time to opt into the market.

(For more information, read Can Marijuana Stocks Still be a Solid Investment in this Market?)