Last year, we noted the increasing interest in the US cannabis market from leading broker-dealers interest in the Canadian cannabis market was declining.
During the last quarter, this trend has become more significant and we have seen an increasing number of job cuts in Canada. In contrast, the US cannabis market which has seen a substantial increase in the number of people who have been hired over the last twelve months.
Another interesting metric to highlight is related to the amount of capital that has been raised by cannabis companies. During the last quarter, we have noticed a substantial decline in the amount of capital that is being raised by Canadian companies. For US cannabis companies, the trend has been much different, and we continue to see capital enter the sector.
We believe that the cannabis industry is reaching an inflection point and our readers need to be aware of this. During the last month, we have noticed an increase in the number of investors who are “running for the hills” when it comes to the cannabis sector and we believe that this means that it is time to start watching the market.
Last week, two high profile Canadian cannabis producers reported plans to lay off approx. 10% of their respective workforce. These announcements sent shockwaves through the industry and the market responded negatively. Going forward, we expect to see an increase in the number of Canadian companies that are laying off employees as companies continue to put a greater focus on profitability.
Earlier this month, Leafly published an article that covered the US cannabis sector and noted its strong job growth. The US cannabis industry seems to have benefited from the opening or expansion of new markets such as Florida and Michigan. California remains the top cannabis market in the US from an employment standpoint and we continue to be bullish on this market.
When you analyze the total addressable market that is associated with the US cannabis market, we find the opportunity to be more significant than Canada from a population standpoint. Although Canada has a legal cannabis market, it is much smaller than the US and this has been one of the most attractive aspects of the US opportunity. Once cannabis is legal at the federal level in the US, we expect to see a massive influx of capital and for this to be the most substantial catalyst for the long-term opportunity.
Although we are bullish on the growth prospects associated with the legal cannabis market, the market needs to have rational expectations when it comes to the size of the market and the number of potential winners from a company standpoint. In Canada, we are most excited about: Canopy Growth Corp. (WEED.TO) (CGC), Aleafia Health Inc. (ALEF.TO) (ALEAF), Fire & Flower (FAF.TO), Namaste Technologies (N.V) (NXTTF), and MediPharm Labs (LABS.TO) (MEDIF). In the US, we are most excited about: 1933 Industries (TGIF.CN) (TGIFF), Columbia Care, Hemptown USA, and Medicine Man Technologies (MDCL).
Published at Fri, 14 Feb 2020 12:32:44 +0000