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Weed Stocks Burned as Cowen Paints Hazy Outlook

By Yasin Ebrahim

Investing.com – Tilray led the freefall in marijuana stocks on Monday as one analyst on Wall Street warned that the upcoming further legalization of cannabis products in Canada, dubbed Cannabis 2.0, is unlikely to ease the current headwinds in the industry.

"We are downgrading Aurora Cannabis (NYSE:ACB), Sundial Growers (NASDAQ:SNDL) and Tilray (NASDAQ:TLRY) to market perform, all from outperform, as we grow increasingly cautious on the outlook for cannabis in Canada," Cowen said in a note.

Tilray fell about 10%, Canopy Growth (NYSE:CGC) lost 6%, Aurora Cannabis fell 7%, but Sundial Growers bucked the trend, rising 4.5%.

The legalization of Cannabis 2.0 products in October last year, stoked investor hopes that an increase in cannabis-infused products available for sale would underpin sales and spark a turnaround in the industry.

Industry experts had estimated that sales of cannabis products such as edibles, beverages and vaping products were expected to account for $900 million of sales next year, according to Brightfield Group, a market research firm.

But those hopes were somewhat overly optimistic given the headwinds in the sector, including supply and cash difficulties that continue to keep a lid on growth, Cowen warned.

“Headwinds that have plagued the industry (pricing, stores, inventory) do not appear to be fading as anticipated, while 2.0 is likely not the elixir that the market was hoping for. Canopy Growth remains our only outperform rated stock among the Canadian LPs.”

Health Canada, the governing body overseeing and regulating cannabis sales, began accepting applications for the production of cannabis-derived products on Oct. 17. But under regulatory rules, the products were not allowed to hit the shelves for 60 days - until December – in order for inspections and approvals to be carried out.

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