For growth investors, the Canadian pot market has been one of the most appealing investment opportunities in the world, but it's also one of the most frustrating. It presents a whole lot of opportunity because it's the only country other than Uruguay that's legalized recreational marijuana.

However, the rollout since legalization has been less than ideal as supply issues have plagued the industry from the start and high pot prices have made black market products more attractive to price-conscious consumers. Analysts have been downgrading their expectations for the market due to these challenges, and a top Canadian is just the latest to cut its projections.

CIBC slashes projections for the recreational market by 26%

Canadian Imperial Bank of Commerce (NYSE:CM) Capital Markets previously estimated the recreational pot market in Canada to be worth 3.4 billion Canadian dollars in 2020. However, due to the COVID-19 pandemic and an insufficient number of stores open, the bank now expects that segment of the market to be worth CA$2.5 billion. Last year, recreational sales in Canada totaled CA$1.2 billion.

CIBC adjusted its forecast for 2021 as well. From a previous forecast of CA$5.5 billion, the bank now expects next year's sales to come in at CA$4.1 billion, for a 25% reduction. The key items that are dragging the forecasts down are related to COVID-19. While sales have been strong during the early stages of the pandemic, the real concern for analysts is that the pandemic will slow the opening of additional stores and discourage new store license applications. 

Cannabis plant.

Image source: Getty Images.

Not a new problem for the Canadian pot market

In April 2019, cannabis research company BDS Analytics downgraded its forecast for the Canadian pot market as well. Its forecast included both recreational and medical segments of the market, but the result was the same -- less growth in the years ahead. In January 2019, the Colorado-based company was projecting the Canadian market to be worth $5.9 billion as early as 2022. 

But just months later it revised its forecast down to $5.2 billion, and it also wouldn't expect the market to reach that level until 2024. It's still a solid annual growth rate of about 44% and well up from the $569 million that the market was worth in 2018.

Should you invest in Canadian pot stocks?

The Canadian cannabis market is still in its early growth stages and there's plenty of potential ahead, but investors may be wondering if it's worth investing in. After all, BDS projected in 2019 that the legal market for cannabis in California alone could reach $7.2 billion by 2024. From a growth perspective, there's no doubt that the U.S. legal market has higher growth prospects -- in 2019 it was already worth $12.4 billion, and that's with pot still illegal at the federal level.

However, amid the COVID-19 pandemic, growth may now be on the back burner. Many cannabis companies are struggling to operate and that's why investing in a top Canadian pot stock like Ontario-based Aphria (NASDAQ:APHA) may be an enticing option. Unlike their U.S. counterparts, Canadian pot stocks are getting support from their federal government during the pandemic. And it's also much easier for them to access banking since pot is legal federally. That puts them in a much better position to get through the pandemic in one piece.

As of February 29, Aphria had CA$515.1 million in cash and cash equivalents on its books. And over the trailing nine months, it used up CA$124.4 million to fund its day-to-day operating activities. Cash is not an issue for Aphria today and with the support of the federal government, it likely won't be during the pandemic. That's why it's one of the safer pot stocks to invest in today. It's also still been generating nice growth. Aphria released its third-quarter results on April 14 which showed quarter-over-quarter net revenue growth of 20% from the second quarter. It was also the fourth straight period that the company recorded positive adjusted earnings before income taxes depreciation and amortization (EBITDA).

Over the past year, Aphria's also been one of the best pot stocks to invest in, outperforming the Horizons Marijuana Life Sciences ETF and many other big-name cannabis producers:

APHA Chart

APHA data by YCharts

While no investor's going to brag about a 45% loss, Aphria is still ahead of the pack in Canada and in a good position to recover. The pot stock has the potential to generate some strong returns for investors as the Canadian cannabis market continues to evolve and grow.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. 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.