There’s no denying it. Some folks believe strongly in Canadian cannabis company Sundial Growers (NASDAQ:SNDL) while others are highly critical of it. Yet there’s no denying that SNDL stock fluctuates quickly and could provide powerful returns for nimble traders.
Recently, I cautioned investors about buying Sundial’s shares solely based on the attention that Reddit users at r/WallStreetBets had brought to the stock.
However, I was generally bullish on SNDL stock, and I’m sticking to that position today. I’m fully aware that I’ll have to contend with the haters and doubters out there.
But I think I can build a solid bull thesis on Sundial Growers and fend off the critics with facts.
A Closer Look at SNDL Stock
There’s no denying that pot stocks tend to be volatile. That’s generally even more true when it comes to low-priced cannabis stocks.
Sundial’s shareholders learned this lesson the hard way on Oct. 30. That’s when SNDL stock declined to a gut-wrenching 52-week low of around 14 cents.
It was a precipitous decline as the stock was worth $11.50 per share at one point in 2019. Amid really tough times in 2020, I vaguely recall some folks predicting that the shares were headed for zero.
I certainly hope that they didn’t take a short position in SNDL stock, as it rocketed up to a 52-week high of $3.96 last month. After that bull run, the talk of Sundial Growers shares going to zero seemed absurd.
Admittedly, the parabolic move wasn’t sustainable, and the share price retraced to the $1.50 area in March.
The point is that the stock is now a long way above its 52-week low, while its overall uptrend remains intact. The stock’s volatility could certainly return in the near future, however.
The Unquestioned Worst Marijuana Stock?
Given the favorable climate for the pro-cannabis movement, you’d think that the overall sentiment surrounding SNDL stock would be positive.
On a truly historic day, voters in five U.S. states approved pro-marijuana-rights measures in November. Because of that, 15 U.S. states are expected to allow recreational marijuana to be sold. Plus, 25 states will permit some form of medical marijuana to be sold.
Amid this pro-pot backdrop, Sundial’s stakeholders ought to have an airtight bull thesis. Yet,the company’s critics are vocal – and sometimes prone to exaggeration.
One writer called SNDL stock “the unquestioned worst pot stock you can buy” and “the absolute worst pot stock that money can buy.” This writer acknowledged multiple factors weighing in Sundial’s favor:
- The apparently pro-cannabis Democrats’ retaking of the White House and a nominal majority in Congress
- Sundial’s balance-sheet improvement; as of March 15, the company had the approximate equivalent of $580 million in unrestricted cash
- The heavy shorting of SNDL stock, which could set it up for another massive short squeeze
Questioning the Questioners
Unfortunately, long-term Sundial shareholders will just have to get used to the doubters and haters.
Of course, it’s not true that SNDL stock is the “unquestioned worst” as I’m questioning that claim right now.
Yes, there’s been share dilution. That is a known factor, however, and has likely already been priced into the stock.
Another writer declared that Sundial Growers “can’t even hardly grow revenues in a booming business in most of North America.”
Yet, the last time I checked, Sundial increased its gross revenues by 10% on a year-over-year basis in 2020.
Moreover, Sundial’s net cannabis revenues last quarter climbed 8%, compared to the prior quarter. As far as I can tell, Sundial Growers’ revenues are moving in the right direction.
The Bottom Line
Despite the haters and the naysayers, you don’t have to avoid or run to sell SNDL stock in a panic.
Just be aware of the stock’s tendency to be volatile – and when you’re doing your research, focus on the data rather than the drama.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
