‘It’s messy’: How investors can play the legalization of cannabis edibles

‘It’s messy’: How investors can play the legalization of cannabis edibles

The new wave of cannabis legalization in Canada was met with optimism from investors on Thursday, but analysts warn it’s still too early to bet on the market’s rejuvenation. Trapped in a bear market for months, cannabis stocks flashed some of their old potential as market leaders such as Canopy Growth Corp., OrganiGram Holdings Inc., MediPharm Labs Corp., Cronos Group Inc. and Aurora Cannabis Inc. each closed between five and eight per cent up. Hexo Corp., which was battered last week after significantly lowering guidance, gained nearly 20 per cent to close at $3.81. It’s never clean from the beginning. There’s going to be a lot of starts and stops for the next two to three quarters Roth Capital Partners analyst Scott Fortune While cannabis derivative products such as edibles, vapes and beverages have been legalized, they can only begin appearing on shelves after a 60-day moratorium ends on Dec. 16. Instead of jumping into the market now, Roth Capital Partners analyst Scott Fortune recommends that investors — especially those with a long-term scope — wait a few quarters until the market settles. “We’ve seen this before in California,” Fortune said. “Every time you have a new legalization, it’s messy. It’s never clean from the beginning. There’s going to be a lot of starts and stops for the next two to three quarters. In the two months leading up to the legalization of cannabis in 2018, the North American Marijuana Index jumped more than 40 per cent. But after sales began on Oct.17, the benchmark index entered a downward spiral that would see it bottom out in late December. A cannabis 2.0 market won’t follow the same example, Fortune said, as he doesn’t expect stocks to once again run up in advance of sales. Investors have switched their mindsets to…

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