Canadian cannabis company Sundial Growers (NASDAQ:SNDL) isn’t the biggest marijuana grower — not even close. Yet, SNDL stock has been quite popular among both short-term traders and long-term cannabis-market investors.
It’s not difficult to see why the stock is well-liked in the trading community. The shares are cheap and available on the famous Nasdaq Exchange, so they’re accessible through many self-directed U.S. brokerage accounts, even including some retirement accounts.
Adding to the stock’s popularity is its involvement in a Reddit-driven buying frenzy in January and early February. It was fascinating to witness a relatively small cannabis cultivator get mentioned in the mainstream financial media, I must admit.
But, what ever happened to the stock after the hype wore off? Moreover, is this a good time to take a position? We’ll address these questions today, starting with an overview of the stock’s recent price action.
A Closer Look at SNDL Stock
On Oct. 30 of last year, times were tough for owners of SNDL stock as the shares were trading at a 52-week low of around 14 cents.
That’s a hard pill to swallow, as the stock was worth $11.50 per share at one point in 2019. However, the shares weren’t headed for zero, as the bulls would soon regain control of the price action.
In late January of 2021, the buyers managed to push SNDL stock above 80 cents. Yet, that was only the beginning, as a much bigger surge was on the horizon.
Amazingly, the share price catapulted up to a 52-week high of $3.96 on Feb. 11. Unfortunately, that turned out to be a short-term peak.
The stock declined for the remainder of February as well as early March. On March 5, the share price settled at $1.14.
Going forward, traders will want to monitor the $1 level. That’s because the Nasdaq Exchange has been known to delist stocks if they trade below $1 per share for an extended period of time.
Wrong Reasons to Buy the Stock
My take is generally bullish on SNDL stock, but I want to express that traders shouldn’t buy the stock for the wrong reasons.
For example, some folks might consider buying the stock because they’re anticipating an earnings beat. The company plans to release its fourth-quarter and full-year financial data on March 17.
Personally, I won’t attempt to guess whether Sundial will post a beat or a miss on earnings day. Instead of playing that game, I would recommend waiting and then accumulating the shares if the price goes down.
Other investors might be thinking about buying the stock because of the attention Reddit users at r/WallStreetBets brought to Sundial Growers. The problem with jumping on that bandwagon is that the train has already left the station, so to speak. The Reddit crowd can be quite fickle, and it appears that they may have already lost interest in SNDL stock.
Surprisingly Strong Capital Position
So, what’s a better reason to buy the stock? In most instances, I would assert that solid financials should guide investors’ decisions – and I would apply that principle to Sundial Growers as well.
On Feb. 4, Sundial announced that it now has approximately 610 million CAD in cash on its balance sheet. Moreover, the company added that has roughly 61 million CAD worth of “marketable securities and loans receivable.
The total value of Sundial’s cash and securities, therefore, would be approximately 671 million CAD. That’s actually pretty impressive for a small cannabis grower.
You might not have expected Sundial Growers to be in such a good capital position. After all, there are pot growers out there that are in the red, financially speaking.
The Bottom Line
Pardon the pun, but in terms of its capital position, it’s encouraging to know that Sundial Growers is in the green.
As I see it, that’s a better reason to own the stock than anything related to Reddit hype or pre-earnings guesswork.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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.