Although the lower-than-expected revenue numbers are concerning, we find the risk of further price compression to be the most significant headwind for the Canadian cannabis industry.
During Aphria’s post-earnings conference call, the management team highlighted the risks that are associated with price compression.
When compared to the same period last year, net revenue declined due to significantly lower wholesale revenue and a lower average selling price.
For Organigram, Alberta’s goal to manage lower levels of inventory has negatively impacted the business and we will monitor how other Canadian LPs are impacted by this trend.
Between price compression and lower demand from Canadian provinces, cannabis producers are facing major headwinds in the coming quarters.
With broker-dealers issuing downgrades and slashing price targets on Canadian LPs, we continue to prefer the US market to Canada.
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