I’ll admit, it’s not so easy to invest in Canadian cannabis company Sundial Growers (NASDAQ:SNDL). Dreams of 10x gains have eluded SNDL stock holders in 2021 so far, though that story could still have a happy ending.
For one thing, it’s possible that Reddit traders could target Sundial as a short-squeeze candidate. We’ve seen this happen before, so it could happen again.
Or, there could be a legislative breakthrough that propels cannabis stocks to new heights. Indeed, it wasn’t long ago when Senate Majority Leader Chuck Schumer proposed legislation that would legalize marijuana at the federal level in the U.S.
These are all angles worth considering – and by digging a bit deeper, we might even uncover more reasons to stay the course with Sundial Growers.
A Closer Look at SNDL Stock
$1 should be not just a target for SNDL stock bulls, but also a springboard to much higher prices.
The stock landed at around 80 cents on July 23, so $1 isn’t an unreasonable objective. Besides, the buyers pushed the share price up to a 52-week high of $3.96 in February.
Were those buyers Reddit users? I can’t prove or disprove it, but I suspect that r/WallStreetBets traders might have been a contributing factor.
More recently, there was a price pop to $1.29 in June. Somehow, though, the bulls have had difficulty maintaining the momentum of the rallies.
So, let’s just take some baby steps before targeting $3 or $4.
The Reddit traders can initiate a short squeeze if they want to, but for the time being, keeping SNDL stock above $1 for a while would be a reasonable objective.
Now, before I finish this section, I must concede that Sundial’s trailing 12-month earnings per share is around -47 cents.
That’s something which Sundial needs to address as soon as possible. Otherwise, it will be difficult to justify a buy-and-hold position in the stock.
Stronger and More Diverse
On the bullish side of things, Sundial Growers recently completed its acquisition of the Spiritleaf Retail Cannabis Network.
With that event, Sundial acquired all of the issued and outstanding common shares of Inner Spirit Holdings Ltd., which used to trade publicly in the U.S. under the the ticker symbol INSHF.
Obviously, this is big news for anybody who happened to be invested in Inner Spirit Holdings. But, what does it mean for Sundial’s shareholders?
As Sundial Growers CEO Zach George explains, “The acquisition of the Spiritleaf cannabis retail network makes Sundial a stronger and more diverse cannabis company.”
The skeptics might contend that Sundial is a relatively small company in the Canadian cannabis industry.
Sure, there are much bigger competitors in the legalized pot business. Yet, Sundial’s growth story is compelling.
More Than the Shares
At first glance, it might seem like Sundial Growers only gained a boatload of Inner Spirit Holdings shares. However, there’s much more to the takeover than that.
As a diversified cannabis company, Sundial relies on its portfolio of brands. And, Spiritleaf is a major brand in Canadian cannabis.
I’ll use bullet points to sum up the value of the Spiritleaf acquisition:
- Adds well-established Spiritleaf franchised and corporate-owned stores, to the tune of 100-plus stores across six Canadian provinces
- Broadens Sundial’s business with a strategic entry into cannabis retail
- Enables greater access to the retail markets, product marketing insights and consumer purchasing trends
- Allows Sundial to piggyback on Spiritleaf’s reputation as an industry leader
That’s a whole lot of value to be gained – and as good a reason as any to lean bullish on Sundial Growers now.
The Bottom Line
Sure, it’s possible to sit around and hope that Reddit traders pump up the SNDL stock price (again).
However, that’s not much of an investment strategy.
Instead, it’s probably better to examine the company and monitor its growth – which, in the case of Sundial Growers as it acquires a major cannabis brand, is undeniable.
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.
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.
