After a Downbeat 2021, Will Marijuana ETFs Rebound in 2022?
Cannabis stocks and ETFs were massively downbeat in 2021. However, strong sales backdrop, growing medical usage and still-alive chances of a federal approval may cause a bounce back in pot...
Cannabis stocks & ETFs were massively downbeat in 2021, with ETFMG Alternative Harvest ETF MJ (down about 33%), Amplify Seymour Cannabis ETF CNBS (down 34.5%) and Global X Cannabis ETF POTX (down 52.3%) losing havoc past year.
Hopes for a favorable policy outlook and improving industry fundamentals could not save the ETFs. Failure of a rapid full federal legalization with the Democratic majority in both chambers of Congress led to this slump. Last time the pot ETFs tried to rally in mid-November when the reports of a Republican-led bill sought to legalize marijuana at the federal level in the United States (read: Cannabis ETFs Soar on Republican-Led Legalization Bill).
What Lies Ahead in 2022?
The year started on a positive note withTilray Inc. TLRY, a leading global cannabis-lifestyle and consumer packaged goods company with operations in Canada, the United States, Europe, Australia, and Latin America, reported an unexpected quarterly profit. The company reported break-even earnings while the Zacks Consensus Estimate was a loss of 9 cents.
Tilray said its revenue increased by about 20% year over year on stronger demand for cannabis products, though revenues of $1.55.1 million missed the Zacks Consensus Estimate of $173.0 million. Shares surged 13.5% in after hours on Jan 10 having reacted to the earnings update. This result acted as a cornerstone for the entire cannabis space.
Sales have also been strong for marijuana amid the latest virus outbreak. There is a report that some strains of medical marijuana are proving effective to treat coronavirus. The report indicates that medicinal marijuana could block up to 70% of the proteins used by the virus to infect cells (read: Cannabis on a Roll: Guide to ETF Investing).
Sales from Cannabis were $20 billion in 2020, and probably have topped $26 billion in 2021, per a Forbes article. Research conducted by Cowen and Company revealed that the legal Cannabis market is likely to grow 20-30% per year to 50 billion by 2026.
Per an article published on seattletimes.com, Marijuana Business Daily reports that legal cannabis sales in the United States are expected to surpass $30 billion in 2022. With several states passing recreational and medical cannabis initiatives in 2021, sales scenario should improve in 2022.
There has been a strong case for investment for the medical marijuana segment, as patients suffering from chronic illnesses, such as Parkinson's, Cancer, Alzheimer's, and many neurological disorders, are finding relief from medica cannabis, the Forbes article revealed. Biotech companies like Cannabis Pharmaceuticals and AbbVie Pharmaceuticals develop Cannabinoids like THC, CBD, and CBG through proprietary processes without touching the plant, the article also pointed out.
Hence, better business prospects and undervaluation should support the marijuana market even if there is no robust movement on the federal legalization front.
ETFs in Focus
Investors should keep a tab on the ETFs like AdvisorShares Pure US Cannabis ETF MSOS, MJ, AdvisorShares Pure Cannabis ETF YOLO, POTX and CNBS. MSOS is the most asset-rich having amassed about $1.09 billion while MJ, YOLO, POTX and CNBS have garnered about $761.9 million, $177.6 million, $88.3 million and $78.7 million, respectively.
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ETFMG Alternative Harvest ETF (MJ): ETF Research Reports
Tilray Brands, Inc. (TLRY): Free Stock Analysis Report
AdvisorShares Pure Cannabis ETF (YOLO): ETF Research Reports
Amplify Seymour Cannabis ETF (CNBS): ETF Research Reports
Global X Cannabis ETF (POTX): ETF Research Reports
AdvisorShares Pure US Cannabis ETF (MSOS): ETF Research Reports
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