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Cannabis Analyst Reviews Sluggish Canadian Data: 'MSOs Will Outperform Again'

Cannabis Analyst Reviews Sluggish Canadian Data: 'MSOs Will Outperform Again'

Hifyre Canadian cannabis sales data for the month of December is in, and the numbers suggest the Canadian retail cannabis market remains sluggish heading into 2021.

What Happened? Hifyre data suggests Canadian recreational retail cannabis sales grew 8% in the fourth quarter. That's down from 31% growth in the third quarter. Flower prices were down 30% year-over-year and 6% compared to the third quarter. Vape cartridge prices are now down 26% from the first quarter of 2020.

Related Link: Analyst Initiates Coverage Of 3 Cannabis MSOs, Talks Risks Of US Legalization

Why It’s Important: Cantor Fitzgerald analyst Pablo Zuanic said Tuesday that Canadian cannabis stocks like Canopy Growth Corp. (NASDAQ: CGC) and Aurora Cannabis Inc. (NYSE: ACB) have been red-hot in recent months due to high expectations for U.S. cannabis reform.

However, the latest Canadian sales data suggests U.S. multi-state operators are still the best way to invest in cannabis for the time being.

“As the investment debate starts to evolve to what the new US Congress may or may not achieve, and to a closer look at the Canadian LPs actual US positioning (via contingent deal, or non-THC products), we think US MSOs will outperform again,” Zuanic said.

Average Canadian flower prices dropped to just C$7.20 ($5.64) per gram, down from C$10.30 ($8.06) a year ago. Flower prices in the U.S. Northwest are around $8 per gram, and prices east of the Mississippi range in the mid-teens per gram, Zuanic explained.

Earlier this month, Zuanic named Trulieve Cannabis Corp. (OTCQX: TCNNF) and Curaleaf Holdings Inc. (OTCQX: CURLF) his top two MSO stock picks heading into 2021.

Benzingas Take: Cannabis stocks will likely continue to be volatile in the near term while the industry matures. Given the unpredictability of the political environment in the U.S. and the lackluster recreational market growth in Canada, long-term investors should consider diversifying into several different names rather than putting all their cannabis eggs in one basket.

Latest Ratings for TCNNF

Feb 2021Roth CapitalInitiates Coverage OnBuy
Nov 2020Cantor FitzgeraldMaintainsOverweight
Sep 2020Cantor FitzgeraldMaintainsOverweight

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