SNDL Stock: Cannabis Play Sundial Growers Flies High on Reddit Stocks Rally

In what is looking like the latest Reddit rally, shares of Sundial Growers (NASDAQ:SNDL) surged more than 65% in pre-market action on Thursday morning.

Glass jars of marijuana
Source: Shutterstock

Cannabis play SNDL stock is among the top 10 trending stocks on the discussion website according to tracking engine

Traders on the r/WallStreetBets Reddit message board in recent days have been fueling outsized gains in previously beaten-down stocks, including GameStop (NYSE:GME), Koss (NASDAQ:KOSS) and Clovis Oncology (NASDAQ:CLVS).

The chatter and resultant trade surges have stoked the ire and exit of hedge funds and other short-selling money managers who have seen $91 billion shaved from their holdings value, according to data provider S3 Partners. GameStop is a “unique situation,” Ihor Dusaniwsky, S3 managing director said.

Short interest in SNDL stock was about 66 million shares against average daily share volume of 422.5 million, as of Jan. 15. That equates to one day to cover the interest.

SNDL Stock At Reddit Risk

Before Redditors set their sights on SNDL stock, we thought things were looking quite green for the cannabis company. It was gaining traction along with others in the pot stock universe thanks to broader acceptance of marijuana use and expectations for further legalization or decriminalization, particularly at the federal level under President Joe Biden.

As well, last month Sundial Growers surprised investors with the news that it was debt free. Like many cannabis names, the Calgary, Alberta firm was struggling. The company said that just two quarters after its initial public offering, it was already running out of cash. But as of Dec. 21, it had paid down 227 million CAD in debt in 2020.

Debt free, SNDL was ready to focus on strategic growth and other opportunities. Little has been reported since rumors surfaced in December that Sundial would soon merge with Canopy Growth (NASDAQ:CGC). The earlier announcement that Tilray (NASDAQ:TLRY) and Aphria (NASDAQ:APHA) were merging in an all-stock deal stoked the rumor mill.

Which leads us back to the otherwise surging SNDL stock here on Thursday morning. What should you do here? We liked Sundial before the Reddit mob got hold of the idea, so once it cools down — as it inevitably will do — it could still be a good entry or addition to cannabis stocks for your portfolio. But here? No thanks.

On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.

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