Rejection can be painful, especially if you’re a longtime investor in Canadian cannabis company Sundial Growers (NASDAQ:SNDL). Time and again, SNDL stock has flirted with the key $1 level, but gravity keeps pulling it back down.
Source: Postmodern Studio / Shutterstock.com
I’ll admit, I recommended a patient stance on Sundial Growers in July, and my timing wasn’t perfect. Since then, the share price has sagged and some investors are undoubtedly getting frustrated.
You can bail on SNDL stock if you want to. However, 2021 isn’t finished yet and there may be a happy ending to this story.
Even as the stock’s price action disappoints some traders, the bulls should find some encouragement in Sundial’s improving gross cannabis revenues. Plus, apparently the company has a new game plan, as articulated by the CEO himself.
A Closer Look at SNDL Stock
I’m pounding the table for the $1 price target, but history shows that SNDL stock is capable of rising to $3. Heck, it might even get to $4.
Need proof of this? Consider that in February, the Sundial share price spiked to a 52-week high of $3.96.
Granted, it’s entirely possible that r/WallStreetBets traders were a contributing factor in that breathtaking rally. And for all we know, Reddit users might be planning another short squeeze soon.
Rather than sit on our hands and wait for that to happen (or not), let’s focus on $1 as a more reasonable objective.
Now, I have some good news (sort of). Back in July, I reported that Sundial’s trailing 12-month earnings per share was around -47 cents.
As of Sept. 13, that number improved to around -25 cents. You’ve got to take your victories where you can get them, right?
It’s All About Perspective
As you can see, I’m not afraid to report the not-so-great news, even if I’m generally bullish on a stock.
When it comes to Sundial’s recently reported second-quarter 2021 fiscal results, it’s definitely not a perfect scenario.
For example, the company took an adjusted EBITDA loss of $0.2 million during the quarter.
But then, a little bit of perspective can change our outlook. The fact is, the $0.2 million loss is a whole lot better than the adjusted EBITDA loss of $3.9 million that Sundial sustained during 2020’s second quarter.
Moreover, Sundial’s quarterly net loss of $52.3 million compared favorably to the $60.4 million net loss from the prior-year quarter.
And speaking of improvements, the company also reported gross cannabis revenues of $12.7 million. This number represents an increase of 8% over the previous quarter.
Additionally, Sundial observed its solid capital position as the company had $1.2 billion in cash, marketable securities and long-term investments as of Aug. 9, 2021, with no outstanding debt.
Along with those fiscal stats — which really aren’t so bad after all — Sundial Growers offered its stakeholders some inspiring commentary from the company’s CEO, Zach George.
Following Sundial’s restructuring last year, George proposed that his company has been able to “rapidly reshape the business model to focus on a two-pillar strategy that we believe will position our shareholders for future success.”
It certainly sounds like the CEO is pushing for a new and improved Sundial Growers. So, what are the two pillars?
Apparently, the first pillar involves Sundial’s “core cannabis operations which are now vertically integrated with the acquisition of the Spiritleaf retail network.”
George is referring to Sundial Growers’ finalized acquisition of the Spiritleaf Retail Cannabis Network.
This offers Sundial access to the network of well-established Spiritleaf franchised and corporate-owned stores, comprising 100-plus stores across six Canadian provinces.
The second pillar is Sundial’s “investment operations where most of our capital exposure is committed to our joint venture, SunStream Bancorp.”
As the CEO summed it up, “Sundial will benefit from a growing, predictable interest income stream as [SunStream’s] capital is deployed [within the cannabis sector] and the resulting cash flow has materially buffered our pre-profit core cannabis operations to date.”
The Bottom Line
So, there you have it: a mixed fiscal picture which, hopefully, has a positive bias to it.
Sundial’s CEO offered up a compelling, two-pronged argument in favor of a bullish position.
Whether his argument moves you to buy and hold SNDL stock, is entirely up to you.
Just don’t be too shocked if the share price eventually breaks above $1, once and for all.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.