If you’re thinking of gifting cannabis this holiday season, it may pay to shop last minute, according to analysts at BMO Capital Markets calling for discounts near the end of the year.

Tamy Chen and Peter Sklar are forecasting price cuts on middle-tier flower as provinces attempt to clear out vaults ahead of new products like edibles, vapes and beverages, which are expected to launch in mid-December.

“Given the elevated inventory level currently held by provinces, which we have anecdotally heard is largely the ‘mid-range’ flower category, we believe provinces and retailers will likely implement price markdowns to accelerate product sell-through,” they wrote in a research note on Monday.

Higher prices compared to illegal sources have been a major criticism of Canada’s legal market for recreational cannabis. Statistics Canada figures show illegal prices fell to $5.93 per gram in the second quarter from $6.23 in the first quarter. Meanwhile, legal prices climbed from $10.21 per gram to $10.65. The national average price is currently $6.94, according to the federal agency’s crowdsourced data.

The good news for holiday cannabis shoppers could amount to a lump of coal for large licenced producers as they report financial results into 2020.

“We believe provinces and retailers would eventually renegotiate the wholesale prices paid to licenced producers,” Chen and Sklar wrote. “We are forecasting that prices received by licenced producers for recreational dried flower begin to decline in Q1 of 2020.”

They expect calendar third-quarter 2019 sales to provinces will decline 20 per cent quarter-over-quarter, with modest growth in Q4 of 2019 from the opening of 50 new stores in Ontario. That’s on the back of a 50 per cent drop from June to July, according to Health Canada figures.

“Our industry forecast does not anticipate an acceleration in growth until Q2 of 2020, when we believe there will be meaningful store roll-outs in Ontario and some Rec 2.0 sales,” Chen and Sklar wrote. “Our near-term estimates reflect our view that market shares, and revenues, for licenced producers growing in large-scale facilities (Aphria, Aurora, Canopy, and Tilray) will be flat to down sequentially until more retail stores open.”

The analysts cut their revenue and profitability outlook, as well as price targets, on several of the largest pot players under their coverage. They note smaller-scale producers such as Cronos, Sundial, and Supreme stand to gain ground against bigger rivals.

“We believe their flower products should have some quality differentiation relative to the over-saturated ‘mid-range’ flower segment,” Chen and Sklar wrote.

Their assessment of the cannabis market is based on two key assumptions; Ontario abandoning its wholesale cannabis business in favour of Saskatchewan’s model where licenced producers sell directly to retailers, as is reportedly being considered, and Health Canada not delaying the release of vape products amid fears of negative health impacts.

“If Health Canada decides to delay the roll-out of vape pens due to the ongoing issues in the U.S., there would be downside to our estimates,” Chen and Sklar wrote.