Canadian Cannabis Sales On The Rise Amidst Supply Challenges: Stocks To Watch

Canada recorded a fifth consecutive month of cannabis sales growth in July. Sales clocking the CA$104.5 million mark marked an important milestone, even as the country continues to grapple with lots of challenges that continue to curtail sales.

Cannabis Supply Challenges

Since the country legalized recreational use at the federal level, cannabis sales have totaled more than CA$688.58 million. Considering the steady rise, it is highly expected that the country will hit the CA$1 billion mark in sales, before the end of the year. Observers expect cannabis sales to rise to about CA$5 billion over the next five years.

Regulators unpreparedness is one of the tailwinds that has continued to affect cannabis sales. At the start of the year, Health Canada had received over 8000 cultivation processing and sales applications. The regulator has struggled to approve a good chunk of the applications, a move that has made it impossible for cultivators, processors and retailers to address the enormous market potential.

Provinces have also been on a go-slow on the issuance of licenses for physical retail stores, a move that has significantly affected legal cannabis sales. A limited number of physical stores has forced people to rely on online channels to replenish their cannabis supplies.

However given that it takes longer to get supplies from online stores, others have had to rely on illegal channels for supplies. The result has been a booming black market for cannabis sales contrary to what regulators envisioned with the legalization drive last year.

Unless regulators move with speed to address the supply shortfalls, then legal cannabis sales will grow at subdued levels as more people resort to illicit channels for supplies. License approvals should help replenish the current supplies channels making it easy for people to buy cannabis instead of having to resort to illegal channels.

As a cannabis pioneer, Canada also continues to provide great exposure to the burgeoning sector. A number of stocks continue to provide exciting investing opportunities.

Canadian Cannabis Stocks To Watch

Choom Holdings Inc. (CNSX: CHOO) is one of the cannabis plays that boasts of tremendous potential in the burgeoning Canadian cannabis landscape. Through its subsidiary Medi-Can, the company is engaged in the cultivation and commercialization of cannabis for medicinal purposes. While the stock has taken a significant hit, the pullback presents an opportunity to buy the stock at a discount as the company expands its footprint into the U.S.

Chemistree Technology Inc. (CNSX: CHM) is another pot stock that has taken a significant hit in recent months but with tremendous potential in the burgeoning Canadian cannabis landscape. Headquartered in Vancouver, the company has turned its attention to the U.S cannabis sector whereby it is currently providing turnkey solutions for the industry. Its corporate strategy revolves around the acquisition and development of vertically integrated cannabis assets.

Hexo Corp (TSE: HEXO) is one of the Canadian plays that has underperformed due to supply problems with local provinces. The company boasts of one of the biggest production capacity that should benefit regulators ramping up the issuances of licenses. The company has already built up solid inventory levels from which it should generate significant value on the market opening up. The inking of a joint venture with Molson Coors Brewing paves the way for the company to diversify its product line into CBD infused beverages.

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