At the beginning of 2019, there was no better business in Canada compares to cannabis stocks marijuana dispensary canada However, following a perfect first quarter that saw several cannabis stocks hitting their best profit margins ever, the trend has eventually changed. Over the past few months, most of these stocks have lost close to half their value, if not more. Even though this trend may seem interesting to some cannabis stock investors, it is also important to note that investing in the cannabis space is riskier than we anticipated about 2020. Top market analysts and investors have come up with reasons contributing to this occurrence. Some of the suggested reasons as to why investing in the top cannabis stocks in Canada is risky includes:
Slow Retail Roll Outs in Select Provinces
Despite the authorization of marijuana stocks to grow and sell cannabis, there has been no assurance that legal ways exist to get their products to stores. The most populated province in Canada, with 14.5 million people, only had 24 open dispensaries a year after legalizing cannabis sales. This paved the way for the thriving of black market cannabis, with only a few purchasing options available for consumers. It is as well difficult to put up retail stores in this kind of provinces over a short period of time.
Canada’s Health License Approval is a Challenge
To start with, Health Canada has been buried with sales license applications, cultivation, and processing. At the beginning of 2019, there were awaiting review in excess of 800 licensing applications. Although a rules change on how growers apply for a cultivation license, Health Canada has not been able to conduct the reviews of the application quickly. These long wait trends are expected to continue in 2020.
Existence of a Large Pricing Gap Between Legal and Illicit Cannabis
In reference to the previous point, you will understand why illicit weed is thriving while legal cannabis keeps struggling. Please take note that illegal producers do not have to wait for cultivation and sales licenses. Neither will they pay cultivation, excise, state, or local income tax. This makes it clearly impossible for legal growers to compete with the black market on price. This being the reason it was established in the third quarter that black market cannabis is 45% cheaper compared to legally grown on a per gram basis.
Virtual Nonexistence of Overseas Sales
There is no practical existence for international Canadian cannabis stock sales. While these international markets should prove to be the future target when local demand in Canada is met, that is not the case. Canadian cannabis stocks will still have to rely on the domestic market, and this is not a good business scenario as the domestic market will be overcrowded, resulting in lower profit margins.
Derivative Sales Could be Hurt by Vape Concerns
The vaping concerns will also highly impact cannabis stocks. This is a result of the increased number of recorded effects and death tolls rising from vape concerns. This will tend to make people shy away from vaping and all the derivatives with suspected to come along with vaping effects. This will impact on the activities of the cannabis stocks negatively.
In conclusion, investing in cannabis stocks in Canada is foreseen to be a risky venture. Owing to the several reasons stated, it is advisable that those in fear of losing their investments in the cannabis stocks should as well make an attempt to invest somewhere else. However, one can still risk investing with hope of reaping good results.