Cannabis stocks rallied out of the gate Friday, after a report that the Canadian province of Ontario will open up the market for retailers with plans to issue abut 20 new store approvals starting in April of 2020. The news reported by Canadian network CBC eased concerns about the shortage of stores that has hampered the development of the legal cannabis market in Canada and allowed the black market to continue to thrive. "This is certainly better than the status quo," said MKM analyst Bill Kirk. "In the fight to take share from the illicit market (which has ~80% share), access to stores has been a major issue." he cautioned, however, that access is not the only obstacle the market is facing, highlighting quality and price as other major issues. A survey conducted by MKM found Canadian consumers using the black market due to price convenience and also quality. "Further, Canopy /zigman2/quotes/200603886/composite CGC -5.47% /zigman2/quotes/202205609/delayed CA:WEED -5.73% teased an expectation for 40 Ontario stores per month beginning in January," said Kirk. "If the details of 20 store/month beginning in April hold true, Ontario would have 62% fewer stores by year-end 2020 than Canopy had expected (480 vs 180). All else being equal, we would recommend selling into any strength this news may produce." Canopy shares rose 5%, Aurora Cannabis /zigman2/quotes/210559470/composite ACB -1.96% /zigman2/quotes/203734337/delayed CA:ACB -2.05% was up 5.2%, Cronos /zigman2/quotes/206842762/composite CRON -4.31% /zigman2/quotes/202715342/delayed CA:CRON -4.77% was up 3% and Tilray /zigman2/quotes/209129655/composite TLRY -13.05% rose 2.5%. MedMen /zigman2/quotes/201940908/delayed MMNFF +2.48% rose 11%, Aleafia /zigman2/quotes/203485112/delayed ALEAF -3.72% rose 5% and Organigram /zigman2/quotes/209289540/lastsale OGI -0.75% added 5%.
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Cannabis stocks rally on report Ontario set to open market and add more stores