Liquid Alternatives: Cannabis Growth Projections Impressive; POTX to Benefit
The POTX cannabis ETF is showing signs of improving momentum.
The Global X Cannabis ETF (NASDAQ: POTX) has bounced back smartly from its mid-March, corona-induced price swoon to $6.50. In a high-volume rebound, the ETF rose to $10.64, and thereafter it has moved sideways. However, it is currently ruling above the 50-day moving average, and increasingly it looks like it will soon resume its rally. Though the ETF was punished along with the rest of the market, things may have improved for cannabis fundamentally. (ETF Trends)
Growth projections for cannabis
According to Global X analyst Pedro Palandrani, Canada’s new recreational cannabis market, dubbed Rec 2.0, is bullish for the market.
“Before Rec 2.0, only dried flower and oil were products sold, but now the sale of cannabis beverages, edibles, and vapes, among other forms, is permitted. Derivative formats like these account for almost half of sales in mature and developed markets such as Colorado, showing how Rec 2.0 could play a major role in accelerating cannabis sales in Canada,” writes Palandrani.
Though the pandemic helped boost sales of weed, sales were already rising from 2019 levels.
“January and February sales numbers in Canada increased by 181% year-over-year to C$154 million and 190% to C$150 million,” he observes. “Estimates from Cannabis Benchmarks for March sales show a spike to C$216 million. That’s more than three times March 2019’s sales of C$59 million.”
Palandrani also speculates that COVID-19 could act as a catalyst for the nationwide legalization of cannabis in the U.S.
The idea would be to gain from taxation of its lucrative revenues.
“Estimates hold that nationwide legalization in the U.S. could generate $132 billion in aggregate tax revenue and more than a million new jobs across the country by 2025. Such growth comes not from an unproven, speculative market, but from the conversion of a large illicit market to a legal, regulated one.”
From just a $12 billion market size today, the global marijuana market could burgeon to $630 billion by 2040. The hemp-derived CBD product market sized $591 million in 2018, is expected to grow to $22 billion by 2022.
Long-term bet on weed via the POTX ETF
With improving fundamentals, the Global X Cannabis ETF (NASDAQ: POTX) could attract the attention of long-term investors.
A further improvement in the price performance of the ETF is definitely on the cards.
Related Story: The DailyAlts Playbook: How to Play Recreational Cannabis
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