While Canadian cannabis company Sundial Growers (NASDAQ:SNDL) isn’t the biggest player in the pot game, SNDL stock still gets a lot of attention as a so-called meme stock.
In other words, it’s been said that Reddit traders like to talk about Sundial as a short squeeze target. And I’ll grant, this is an angle worth considering.
On the other hand, investors don’t have to sit around and wait for the Reddit short squeeze mob to set their sights on SNDL stock.
There are other reasons to take a bullish position today – not the least of which is a high-profile legislative push to bring sweeping reform to U.S. marijuana laws.
A Closer Look at SNDL Stock
Could there be another short squeeze of SNDL stock in 2021? Sure, it’s apparently happened before and could happen again.
Now, I can’t prove that r/WallStreetBets users caused the Sundial share price to skyrocket in February. However, it would be difficult to identify a better explanation.
Just look at the price action. SNDL stock was trading at 56 cents on Jan. 26. Then without warning, it took a moon shot to $3.96 a couple of weeks later.
There wasn’t any news-based catalyst happening at that time, as far as I can determine. Plus, that’s the time when meme stock mania was in full swing.
You might not be interested in buying a stock after a vertical move like that, but there’s good news.
SNDL stock is down to 81 cents, so hopefully you’ll have a chance to pick up some shares at a reasonable price.
Not Perfection, but Improvement
Before we address the potentially game-changing legislative bill that’s been garnering attention, we should perform a brief checkup on the state of Sundial’s fiscal health.
Sundial Growers’ most recently reported results, as of this writing, are from 2021’s first quarter. All in all, the picture is bright if not entirely perfect.
One notable highlight is the $1.7 million in quarterly earnings from operations.
That’s a huge improvement compared to Sundial’s loss from operations of $32.7 million recorded during the prior quarter.
Then there’s the fact that Sundial achieved its first quarter of positive adjusted EBIDTA in the company’s history, at $3.3 million.
This is a whole lot better than the prior quarter’s adjusted EBIDTA loss of $5.6 million.
But again, the results weren’t perfect. Unfortunately, Sundial’s gross cannabis revenues totaled $11.7 million, marking a 30% quarter-over-quarter decrease.
Despite the mixed results, Sundial Growers CEO Zach George chose to accentuate the positive and retain an optimistic outlook.
“Our strong financial position, unique cultivation facility and focus on premium inhalables have positioned us for improved performance in the second half of 2021 and beyond,” George said.
This Is Monumental
And now, for the major catalyst that could push SNDL stock to fresh short-term and even long-term highs.
On July 14, Senate Majority Leader Chuck Schumer proposed legislation that would legalize marijuana at the federal level in the U.S.
Reportedly, the bill is known as the Cannabis Administration and Opportunity Act. If passed into law, it would remove marijuana from the Controlled Substances Act.
Plus, the bill seeks to introduce regulations to tax cannabis products. On top of all that, the Act would expunge the federal records of nonviolent prior cannabis-law offenders.
“This is monumental,” Schumer declared with more than a hint of bombast. Yet, I won’t say that he’s not right about that.
For SNDL stock investors, “monumental” is absolutely the right word. Any pro-pot legislation, be it in the U.S. or Canada, is bullish for cannabis stocks in general.
And with Sundial shares being so cheap, this event could provide a setup for a swift price move.
The Bottom Line
Sundial Growers didn’t necessarily need Schumer’s bill right now. The company is doing reasonably well on the fiscal front.
That being said, the proposed legislation is undoubtedly welcome among pot stock investors.
We could even say that we’re witnessing history in the making – or at the very least, a prime trading opportunity with SNDL stock.
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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.
