Health Canada has granted a total of 50 cultivation licenses, and Canaccord Genuity analyst Neil Maruoka thinks it is unlikely one will become dominant enough to control more than 20 per cent of the total supply.

In an extensive research report on the Canadian cannabis sector yesterday, Maruoka revised his market share estimates in the midst of what he referred to as a “rapidly changing landscape”.

“Our projections of respective market sizes remain largely unchanged and while we remain confident this growth can be achieved, we also believe the significant increase in granted licences is likely to create stronger competition amongst LPs,” explains the analyst. “We continue to expect that established producers with solid balance sheets, such as Canopy, Aphria, and Aurora, are likely to emerge as dominant players; however, we no longer feel it is reasonable to assume that any one LP can capture over 20% share of a likely increasingly crowded market.”

Maruoka’s revised estimates have Canopy Growth Corp. commanding a 15 per cent share of the recreational market and 12 per cent of the medical market, down from 21 and 17.5 per cent, respectively.

He thinks Aurora Cannabis will be the second largest supplier, with 10 per cent of the recreational and 10 per cent of the medical market. And he thinks Aphria will be the third largest supplier, with nine per cent of the recreational and 7.5 per cent of the medical market share.

While launching coverage of three new LPs (see here) Maruoka’s new take on the macro environment has led to downgrades for incumbents. In the new report, the analyst lowered his target prices on Canopy Growth Corp. ($10.50 to $9.50), Aurora Cannabis ($3.25 to $2.85), Aphria ($7.00 to $6.75), Supreme Pharmaceuticals ($2.50 to $2.00), Organigram Holdings ($3.40 to $3.10) and Emblem Corp. ($3.90 to $2.80).

In the midst of the price target cuts, Maruoka singled out one Licensed Producer for an upgrade.

“Although industry valuations have been trailing off, we believe Aphria’s ~38% share price decline since reaching 2017 highs is in contrast to the company’s continued QoQ profitability and the approval of its Part II build-out, making current trading levels considerably more attractive,” the analyst said. “Our revised target of C$6.75 (from C$7.00) implies a 24.5% return, and we are upgrading to SPECULATIVE BUY (from Hold).”