It’s entirely possible to take a position in marijuana stocks without spending a lot of money. One example is Canadian cannabis company Sundial Growers (NASDAQ:SNDL), as SNDL stock is among the cheapest pot stocks on the Nasdaq Exchange.
I’m not going to say that cheaper is always better. Marijuana penny stocks are speculative assets. Therefore, please don’t take a large position in Sundial Growers.
That being said, investors can realize gains of 100% or more this summer with SNDL stock. As we’ll see, this has happened in the not-too-distant past.
Granted, this stock was a Reddit and Robinhood favorite, but now seems to be forgotten – and that’s a cue for contrarians to seize the moment and grab a few shares of the name.
A Closer Look at SNDL Stock
As recently as late January, SNDL stock was off of most traders’ radars. At that time, the shares were trading for less than $1 apiece.
All of a sudden, it became a “meme stock” as Reddit and Robinhood traders turned their attention to Sundial Growers. Amazingly, the share price rocketed to a 52-week high of $3.96 on Feb. 10.
Unfortunately, SNDL stock wasn’t a darling of the markets for very long. After topping out in February, the stock fell back below $1 in April.
The decline continued into May, with the shares trading around 84 cents this afternoon.
Still, at least we can see the moon-shot potential for Sundial Growers – and for all we know, its next rocket ride could happen this summer.
A Nice Surprise
Without a doubt, the owners of SNDL stock were hoping for a positive catalyst on May 11, when Sundial Growers released its first-quarter financial and operational results.
There’s no denying that the results were a mixed bag of good news and not-so-good news. I’ll do my best to present a balanced account, but there’s one gem that definitely deserves attention.
Specifically, Sundial Growers delivered positive quarterly EBITDA, excluding certain items, for the first time in the company’s history.
EBITDA literally means earnings before interest, taxes, depreciation and amortization. For practical purposes, it’s a quick and dirty measure of a company’s profitability after various expenses have been taken out.
Sundial CEO Zach George attached an added sense of importance to his company achieving positive adjusted quarterly EBITDA.
“This result reflects our continued efforts to build a platform targeting attractive capital deployment opportunities while we focus on the continued improvement of our cultivation practices in an immature and rapidly changing industry,” George explained.
He might be over-inflating the significance of this result, I’ll admit. Still, Sundial’s adjusted EBIDTA of $3.3 million is a vast improvement over the prior quarter’s adjusted EBIDTA loss of $5.6 million.
Now the Bad News
I promised a balanced account, so here we go.
For Q1, Sundial Growers posted a net loss of $134.4 million. In the coming quarters, the owners of SNDL stock will definitely want to see the company get closer to net profitability.
Moreover, Sundial’s quarterly gross cannabis revenue totaled $11.7 million. That, I must report, represents a decrease of 30% from the prior quarter.
On the other hand, Sundial had a solid balance sheet, with $969.5 million in unrestricted cash, marketable securities and long-term investments on hand as of March 31.
That last point shouldn’t be dismissed, as it suggests that Sundial Growers should be sufficiently capitalized to enhance its market presence in the Canadian cannabis market this summer.
The Bottom Line
It’s time to let go of the “meme stock” label when it comes to Sundial, as the company is a serious competitor in the Canadian cannabis space.
Furthermore, SNDL stock can rise again. We’ve seen it happen before, and its next moon shot could happen any day now.
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.
