One of Canada’s main banking subsidiaries, CIBC Capital Markets, has reduced its adult-use cannabis forecast for 2020 to $2.5 billion. The predicted decrease in recreational cannabis sales stems from a slow roll-out of retail stores in several significant provinces, in addition to the closing of store locations across the country amid the coronavirus pandemic.
CIBC Capital Markets had initially estimated cannabis sales to hit $3.4 billion, but given the turn of economic events stemming from the coronavirus pandemic, as well as earlier complications with the opening of retail stores, the investment banking subsidiary has reduced its estimate to only $2.5 billion. In addition, the forecast for 2021 has also been decreased from a previous estimate of $5.5 billion to $4.1 billion.
Ontario, one of Canada’s imperative provinces in the sale of recreational cannabis, was the subject to backlogs in new store authorizations before the coronavirus pandemic put a hold on everything. Although now the majority of authorizations have resumed, there will still be a loss in revenue as a result of the delay.
Moreover, CIBC is also stipulating that the initial surge in online sales at the onset of quarantine measures was only temporary, and that it is not a reflection of the cannabis sales outlook. Online sales have only accounted for approximately 10% of total retail sales, meaning that consumers still prefer to shop at a brick and mortar location, despite the straightforward appeal of online shopping.
Information for this briefing was found via Marijuana Business Daily, and CIBC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.