Canadian Cannabis 2026 Outlook

The ATB Take: Following 2025’s high return dispersion—exemplified by Village Farms’ +360% YTD surge on produce privatization/international growth vs Canopy Growth’s ~60% decline on share dilution—we view the 2026 Canadian Cannabis outlook as a stock picker’s market where operational execution is paramount. Despite wide stock volatility, sector fundamentals have generally firmed up, and we expect continued improvement in 2026 driven by rapid growth in international sales and mature-market growth in Canada. 

With global cannabis demand outstripping supply, select LPs are expanding cultivation capacity; however, we view a low risk of near-term oversupply as operators have been cautious and disciplined in their plans. The foremost sector risk is a potential stalling of international growth due to changing regulations, but we think this would likely be temporary and not impact the long-term thesis of secular international growth. As high-margin export revenue and a healthy supply-demand balance domestically support positive FCF and net earnings for certain operators, we anticipate a re-acceleration of institutional capital flows (which we have seen early signs of) to support more efficient price discovery in the sector. Individual stock performance will likely continue to bifurcate based on international exposure, lowcost production capabilities and capacity, and ability to preserve margins and generate FCF. Consequently, we favour operators with proven international leverage, credible paths for growth, sustained profitability, and optionality. 

Among LPs, Village Farms is a top pick (leading margins, scale, Netherlands presence, material 2026 capacity expansion) alongside Decibel (highly attractive valuation, accelerating exports). We remain constructive on retailers and favour High Tide and SNDL as vehicles to play domestic consolidation, also offering embedded optionality on international and US markets, respectively. 

Highlights:
The Global Cannabis Opportunity for Canadian Operators
We value the Canadian domestic market at ~C$6bn (Medical + Rec), forecasting a 5.6% five-year CAGR. However, the international growth story is superior; we estimate current international sales in the main markets at +C$4bn (with Germany contributing ~C$1.6bn) and project international medical markets will potentially eclipse the total Canadian TAM (rec + med) within two to three years via double-digit growth rates. 

We believe that Canadian LPs are uniquely positioned to benefit from international growth. Years of margin compression and hyper-competition in Canada have forced operators to optimize cost structures and quality standards. Many Canadian LPs now consistently produce high quality cannabis at low cost that international peers struggle to match. This first-mover efficiency is a competitive advantage against emerging global competitors. 

Moreover, while we expect increased production from other countries, their capacity is still small compared to Canada. We believe that demand for cannabis will continue to increase internationally, and we expect international markets to remain structurally reliant on imports as domestic cultivation abroad faces capital barriers and regulatory lag, easing potential competitive pressures. With global demand outstripping supply ramp-ups, we think Canadian exports will remain on an upward trajectory.

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