Canadian Marijuana Stocks Have Some New Competition

The legal marijuana market is one of the most rapid growing industries, with most marijuana stocks doubling or even tripling in value over the last trailing year. The outlook on the industry remains highly bullish. According to leading marijuana researcher ArcView, the North American legal marijuana market grew 34 percent in 2016 to $6.9 billion, and is predicted to surpass $21.6 billion over the next three years. This would represent a five-year compound annual growth rate (CAGR) of 26 percent, which is why investors continue to load up in this budding industry.

Canada’s marijuana market has been most impressive. Our neighbor to the north has a long-standing medical marijuana program having legalized it back in 2001. Health Canada has reported that the number of eligible medical marijuana patients grows about 10 percent monthly. There are four key players of the Canadian marijuana stocks that control most of the country’s market, they are Canopy Growth Corp. (TWMJF) Aurora Cannabis (ACBFF), MedReleaf (MEDFF) and Aphria (APHQF). Canada also has to look forward the addition generation of revenue from an entirely new market come this July when adult-use recreational legalization commences.

Canadian cultivators have also generated some of their revenue from exporting dried marijuana overseas to countries that have legalized medical marijuana and either do not have a domestic grow program in place or cannot meet consumer demands. Aphria (APHQF), Canopy Growth (TWMJF), and Aurora (ACBFF) have all lifted their top-line results by exporting their products abroad. But, watch out Canada, there is some new competition in town.

Currently, there are just three countries that are permitted to export dried marijuana abroad for medicinal purposes which are Canada, Uruguay, and the Netherlands. But, Australia has just announced its intention to export medical marijuana which resulted in shares of two Austrian marijuana cultivators AusCann Group (ACNNF) and Cann Group (CNGGF) skyrocketing.

With the global medial marijuana market valued at $55.8 billion, no wonder Australian growers are grinning from ear to ear. Although the current demand is being mostly met by Canada, there is still a large unmet need in several European countries. Both, Auscann (ACNNF) and Cann Group (CNGGF) would accept the opportunity to export excess production abroad to markets in need. The proposal still needs to be passed by federal parliament when it returns to session in February, with the Labor Party having already indicated its intention support the proposal.

Even with this new competition, Canadian marijuana stocks still have the upper hand, for now. This is simply due to their experience, size, growing capacity, and cash on hand. Canadian growers already have developed multiple partnerships in several European markets. The sheer capacity of a company like Canopy Growth, who recently announced an additional 2.4 million square foot of green house facilities that are under construction, is going to be hard for an Australian grower to compete with a company of that magnitude.

Although the Australian market is less experienced than that of the Canadian, it does not mean they will not gain a significant part of the European market in the future. Investors should keep their eyes and ears open regarding Australian marijuana stocks.

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