The cannabis stock meltdown that erased $49 billion in enterprise value this year should begin to shift in 2020 as the industry leaders separate themselves, one of Canada’s largest investment banks forecasts.

A new CIBC World Markets report by John Zamparo, director of institutional equity research, called this year’s “rationalization” of marijuana stock prices inevitable.

“Even the most bullish investor would struggle to justify CA$65 billion in enterprise value for an industry we expect to generate (less than) CA$1 billion of 2022E domestic EBITDA,” according to CIBC’s Equity Outlook report, which devoted a section to cannabis.

The stock prices for industry leaders Canopy Growth, Aurora Cannabis, Tilray and Cronos Group have fallen 60%, 75%, 82% and 70%, respectively, from their 2019 peaks.

“We believe this starts to shift in 2020,” Zamparo wrote.

“With valuations moderating … the focus transitions to picking the industry’s leaders.”

CIBC forecasted key themes for 2020, such as:

An increasing focus on balance sheets and cash in the bank.

A continuation of a pivot among some investors from Canadian to the American cannabis companies, due in part to positive regulatory progression and “superior” valuations.

American counterparts significantly outperforming their Canadian peers.

The report also predicted that institutional investors would move closer to entering the cannabis industry:

“Cannabis remains an industry bereft of institutional investors. In late 2020, we may see some light at the end of the tunnel.”

Reaching positive EBITDA should compel some institutional investors to enter the cannabis space.

However, institutional investors will be watching for marijuana firms to reach free-cash-flow-positive status. CIBC does not expect that to occur until 2021.