Sundial Growers stock forecast: can it return to $1?
The next few weeks may be pivotal to the future of Canada-based licensed cannabis producer Sundial Growers.
It currently has the threat of the NASDAQ axe hanging over it if it fails to get the stock price above $1 for 10 consecutive working days. It is due to release its 2021 fourth quarter numbers on 29 March and if they impress the market and the price rises above the $1 then all should be fine and dandy.
Today (21 March) the price is at $0.52 so those results will have to be mighty impressive.
If that does not work the management may have to resort to a reverse stock split. This would reduce the number of outstanding shares in the market and so increase the price of the remainder. Investors do not lose out in terms of value.
Or it may start hoping that the WallStreetBets crowd may do another shorting squeeze which made the price rocket - briefly - last year.
Or the company may just decide to forgo its NASDAQ listing.
Sundial currently has been given a 180 day extension by the the stock exchange so it is not in an immediate hurry. Sundial said it has "given written assurance to Nasdaq that it will, if necessary, implement available options to regain compliance with the minimum bid price requirement, including a reverse stock split".
On 25 February it also announced the date for closing the deal with Alcanna, Canada’s largest private liquor retailer, had been extended by mutual agreement. The new deadline is 30 March.
And, of course, the scent of legalisation is always hanging in the air. Could the unlikely happen and the US legalise cannabis on a federal level this year?
What does all this mean for Sundial Growers? Has it got itself into a position that might warrant a more bullish SNDL stock forecast for 2022?
Sundial Growers analysis: rough start to 2021, encouraging developments later
Sundial Growers’ first-quarter earnings report highlighted declining revenue. Net revenue from branded cannabis products was down from $11.4m ($9.96m) in the prior quarter to $7.2m. The company said that sales had been affected by multiple industry-wide headwinds, including provincial boards reducing inventory levels, and retail market conditions.
The company says that in response to continued price compression its average gross selling price per gram equivalent of branded products was reduced from $4.14 in the prior quarter to $3.15.
But over the months, Sundial Growers stock news improved.
There were several new developments towards the back half of 2021 that gave the public new reasons to consider investing in Sundial Growers. In early May, the company acquired Inner Spirit Holdings, the retailer and franchiser of more than 100 Spiritleaf recreational cannabis stores across Canada.
According to Sundial’s press release, the acquisition will provide “modest synergies and economies of scale”.
The company followed up with a second acquisition in October. Sundial reached a deal to buy Alcanna, Canada’s largest private liquor retailer, which operates 171 locations predominantly in Alberta as Wine and Beyond, Liquor Depot and Ace Liquor.
This deal provides Sundial with new cash flow generation via a mature and proven business model. Also, Alcanna owned a 63% stake in one of Canada’s largest cannabis retail chains Nova Cannabis. As such, Sundial Growers also strengthens its retail footprint through Nova, and this might not hurt the SNDL stock outlook for investors looking towards 2025 and beyond.
Zach George, Chief Executive Officer of Sundial, commented:
It was announced on 6 January that the structure of the deal had been changed from an all share consideration to a cash and share deal. The Alcanna shareholders have voted to accept the new offer.
In its second-quarter results, the company reported a net revenue for its cannabis segment of C$9.2m. With investment and fee revenue and other income, the total net revenue was C$18.6m for the quarter. Gross cannabis revenue was up 8% on the previous quarter at C$12.7m. The net loss was C$52.3m for the second quarter of 2021 compared to C$60.4m in the second quarter of the previous year.
Sundial also announced it had completed its acquisition of Inner Spirit and the Spiritleaf retail network in July. Spiritleaf is Canada’s largest cannabis retail store network having opened more than 100 franchised and corporate-owned stores across Canada.
In the third quarter, net earnings of C$11.3m were reported compared to a C$71.4m loss in the same period last year. Net revenue from the cannabis segments of C$14.4m showed an increase of 57% in the second quarter of 2021 and an increase of 12% over the third quarter of 2020.
Sundial also announced a C$100m share buyback programme. The company can now buy back up to 102.8 million shares or 5% of the outstanding shares.
George said the results “reflect the initial impact of the business transformation led by Sundial’s team over the last 10 months.” He added the company had never been in such a stronger financial condition. “We remain focused on sustainable profitability and continued improvement in all aspects of our operations,” he added.
Sundial Growers (SNDL) stock forecast: what do Wall Street analysts think?
Sundial Growers has a market capitalisation of $897m at the time of writing (21 March).
Is Sundial Growers stock ‘buy’, ‘sell’ or ‘hold’? According to data from MarketBeat, only two analysts rate the stock and both are a hold - price predictions are not being offered.
A recent stock upgrade came courtesy of ATB Capital last July. The research company upgraded Sundial Growers’ stock rating from ‘underperform’ to ‘sector perform’ with a price target lifted from $0.50 to $0.80. This implies an upside potential of around 14% and was justified after the company closed its acquisition of Inner Spirit Holdings.
The research firm argued that the deal is a sign that Sundial Growers has changed its business structure and investors face an “attractive” opportunity.
But, the Sundial Growers outlook needs to be balanced with the fact that the company’s share price has a history of extreme volatility.
Bear in mind that analysts’ predictions can be wrong. Analyst projections are based on making a fundamental and technical study of the company’s performance. Past performance never guarantees future results.
Do your own research and always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money. And never invest more than you can afford to lose.
FAQs
Is Sundial Growers a good stock to buy?
Sundial Growers stock was a top trending stock on Reddit’s WallStreetBets forum in early 2021. Essentially, a large group of mostly retail investors pushed the stock to nearly $4 a share as part of a short-squeeze.
This is not a typical market action and should be watched with caution. The technical analysis and analysts’ views outlined above indicate that Sundial Growers may have little potential to rebound to its highs in the short term. Analysts’ predictions can be wrong and you should conduct your own due diligence before making any trading decision.
Why did Sundial Growers stock drop?
Sundial Growers stock soared in early 2021 on hype from Reddit’s WallStreetBets forum. Looking at the financial performance in 2021 suggests that there was no fundamental reason for the steep rise.
Will SNDL go up?
This depends on a number of variables. It’s crucial to do your own research to form an opinion of a company’s performance and the likelihood of achieving analysts’ targets. Remember that markets are volatile and past performance does not guarantee future gains. And never invest money that you cannot afford to lose.
Should I buy Sundial Growers stock?
Whether Sundial Growers is a suitable investment for you will depend on your personal research and trading strategy. You need to perform your own due diligence and decide if the stock meets your needs and appetite for risk.
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