Sundial Growers Needs to Hold For the Return of ‘The Donald’

The Republican Party is a mess, let’s be real. Gone is the classic conservatism of the late great Ronald Reagan. In its place is a disjointed ethos of blatant hypocrisies and fringe conspiracy theories. But what makes the matter troubling for troubled Sundial Growers (NASDAQ:SNDL) stock is that the Democrats are arguably worse. In my opinion, much worse.

Photo of Donald Trump standing at a podium with the American flag in the background
Source: Andrew Cline / Shutterstock.com

That puts SNDL stock in quite a bind.

Of course, a bind is exactly what Sundial Growers does not need to be in. The chart of SNDL stock reads like a Matryoshka doll of pain. In one day (on the Oct. 4 session), SNDL dropped 6%. Over the trailing five days, it bled 11%. In the trailing month, it tanked 16%. And in the past half-year period, the equity unit veritably hemorrhaged 41%.

However, on a year-to-date basis, SNDL stock is up 15%. That, according to my colleague Chris Markoch is the nature of penny stocks. In his view, Sundial Growers is a few chapters shy of a new story. So long as that chapter isn’t Chapter 11 bankruptcy, that should be considered a win at this point.

Still, many investors have undoubtedly eyeballed the prospects of federal legalization of marijuana as the ultimate catalyst for SNDL stock. Certainly, everything can change if that were to catapult on the wild streets of Washington. As Markoch stated, legalization is probably a matter of when, not if.

But before you get too excited, he also explained that no one knows for sure when “when” is. Previously, many speculated that a blue wave in the 2020 election could usher in the green paradigm shift.

But I don’t think that will happen now. Not only does President Joe Biden not want such a controversial landmark legislation on his legacy, he suffered a nightmare of a reputational blow.

SNDL Stock Must Survive to See Trump’s Return

I’m sure most reasonable Americans of any political persuasion will agree with me that the public appreciates the Biden administration’s efforts in guiding us through the difficult waters of the novel coronavirus pandemic. No, it’s not the perfect response. But there’s no real blueprint for such a crisis.

However, the pulse of the nation suggests that the electorate are ready for a change. So early into his administration, Biden is one of the least popular presidents, with only President Donald Trump to spare his blushes. Honestly, I don’t expect Biden to mount a successful 2024 campaign, which likely means SNDL stock depends on a future second term of former President Trump.

Yes, I’m dismissing Vice President Kamala Harris’ chances if Biden steps down. Harris has a poor reputation with independents, an area where robust Trumpism can easily turn the tide. So it begs the question, how does Trump feel about marijuana legalization?

It’s a tough one for SNDL stock. Although Trump is a pro-business guy, he’s also a law-and-order guy. Thus, cannabis advocates find themselves in the same contradictory ecosystem as anti-vaxxers opposing a vaccine that Trump himself spearheaded through Operation Warp Speed.

Further, Rolling Stone argues that the Trump administration supported policies and appointed cabinet members that made it difficult “for those in the cannabis industry to thrive.” So, it might be a repeat scenario under a second term, thereby hurting prospects for SNDL stock.

Then again, Trump doesn’t seem to be a person that would let bygones be bygones. You never know. He might fully legalize marijuana just to spite his previous political appointments who largely opposed de-scheduling cannabis.

Further, as long as Trump isn’t mandating Covid-19 (or any other) vaccine, this is one contradiction that his supporters will likely accept.

Red for Green

Indeed, I’d go so far as to say that all his supporters care about is getting the Trump train back in Washington. To get there, he might offer some nuggets to independents and disgruntled Democrats, such as committing to decriminalization as well as de-scheduling of weed.

And I realize that those on the center and left are not sitting at home 24/7 smoking a joint. Trump will need to throw other nuggets at the crowd. But that’s also the point: Trump just needs to throw nuggets while Biden needs a full makeover, something he doesn’t appear capable of doing.

Therefore, if you believe that The Donald will be good for cannabis, you might want to wait until closer to the 2024 election before placing a huge wager on SNDL stock. It could make for an excellent contrarian forecast, that Trump will win a second term and that he, not Biden, will be the green savior.

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On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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