Could The Provinces Derail 2018 Marijuana?

Canadian provinces say they are short on time as Aphria Inc. (TSX:APH) and Canopy Growth Corp (TSX:WEED) see solid gains.

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In early spring, the federal government introduced amendments to Bill C-45 and plans to roll out legislation that will legalize recreational cannabis. The caveat is that it would be up to the individual provinces to come up with details on distribution and sales, where it will be sold, a cap on minimum age, and a bevy of other issues.

The provincial leaders held their annual summit from July 17-19, and several premiers warned that a roll out was coming along slowly. Manitoba Premier Brian Pallister suggested that the federal government should delay legislation by another year so provinces could adequately prepare. Alberta Premier Rachel Notley closed the news conference by echoing this need and stating that several key areas need to be clarified before the provinces can move forward.

Though other provincial leaders would not put an exact date for a delay, the indication was that the July 2018 deadline does not give them enough time to draft a roll out. Prime Minister Justin Trudeau was asked if there was flexibility on the July deadline, and he reiterated that the goal was to have legalization by the summer of next year.

On Thursday, July 27 Manitoba’s government announced an initiative that called for private industry to help figure out market solutions for the province. There are also rifts that exist within the government bureaucracy over whether the sale will be public or private.

New is not scaring away investors in marijuana stocks

Shares of Aphria Inc. (TSX:APH) surged following the release of impressive financial results in July. The stock has seen an increase of 19% in a month. In the report, Aphria boasted significant lowering of production costs in comparison to competitors. The stock has seen 2% growth in value in 2017 but is still more than $2 off of its 52 week high of $8.77 reached in late April ahead of the federal government announcement.

Canopy Growth Corp (TSX:WEED) faced some criticism for its inability to lower production costs at a fast enough rate but reiterated that the company is focused on expanding a large inventory of product in anticipation of official legislation. The stock price has experienced a 2% decline in 2017. Though analysts were initially cool on the financials posted by Canopy Growth, the share price has seen a 12% increase since early July.

Canopy recently announced a licensing agreement for the manufacture of marijuana-infused edible products. Edible marijuana sales soared in Colorado after legalizing recreational use – making up more than 10% of total marijuana sales in 2016.

Though the federal government continues to be optimistic in its projections the roll out for the provinces is starting to hit a number of obstacles. As we move closer to 2018 investors should begin to get a clearer picture of just how tangible the July 2018 target is. For now, both Aphria and Canopy Growth are an attractive add to portfolios looking for long term growth stocks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any stocks mentioned.

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