Although the cannabis sector represented a seemingly viable place to park your money following Canada’s legalization of the much-maligned plant, administrative backlogs and inefficiencies substantially hindered progress. Even without those obstacles, Sundial Growers (NASDAQ:SNDL) stock addresses a relatively small market.
Thus, for Calgary-based Sundial and others, the U.S. represents the holy grail of weed.
While marijuana legalization has always been a contentious topic stateside, the idea that one day, the federal government will de-schedule cannabis is not an unreasonable one. Over the years, I’ve written several articles explaining that this is a very real possibility. Should the U.S. market open up, it would presumably be a boon for SNDL stock.
For one thing, the Pew Research Center states that “Americans overwhelmingly say marijuana should be legal for recreational or medical use.” To be fair, Pew reports notable granularities in the data. Democrats overwhelmingly support legalization for both medicinal and recreational purposes over Republicans who feel the same.
In addition, the younger you are, the more likely you are to support dual medicinal/recreational green lighting, with only one exception. And by race/ethnicity, Asian Americans were the only demographic to not support this dual initiative with a majority consensus.
Still, when you factor in metrics like demographic size and voting power, by and large, Americans on balance favor big government to be out of their bedroom and their dispensary. Naturally, this augurs well for SNDL stock.
If that wasn’t enough, the world is rapidly changing its tune. Recently, the New York Times reported that Malta became the first European Union member to legalize recreational use and growth of marijuana. More startling is Thailand, which began loosening its botanical laws, presumably for a path toward full legalization.
The U.S. Could Be Sadly Stubborn for SNDL Stock
Of course, the above disclosures don’t mean that Sundial is growing to partner with Malta and Thailand. Rather, these developments only add ammunition for pro-legalization advocates in the U.S. If Southeast Asian countries – which historically have some of the most draconian anti-narcotics law in the world – can enter the 21st century, so should we.
Further, cannabis proposals have represented a strange bedfellow between Democrats and Republicans. The former runs on a “my body, my weed” narrative whereas the latter has always been about reducing the size of government and deregulation. Since cannabis appears to be an organic olive branch, the circumstance is favorable for SNDL stock.
Unfortunately, the political divide between the two major parties may not be narrowing as other sources may suggest. For instance, the Harvard Kennedy School Institute of Politics notes that among Democrats, those who support legalization account for 49% versus 28% oppose. Among Republicans, the ratio is 32% support and 50% oppose.
Interestingly, the institute notes that white Americans are the biggest supporters of legalization (49% to 32%), whereas among communities of color, support-or-oppose ratios are almost dead even. If accurate, this polling data implies that Republicans can make inroads with voters of color under a clear ideological banner of the morally upright conservatives versus the unprincipled laissez faire liberals.
If the upcoming midterm election in 2022 and the general election in 2024 become ideologically contentious – as the evidence suggests – then I’m not sure if that favors SNDL stock. Again, one of the reasons why U.S. legalization appeared to be on the fast track was due to cannabis facilitating peace (or at least a cease fire) in Washington.
Now, if cannabis becomes a political hot potato as the above data suggests, then it could be a long day for SNDL stock.
Treat Sundial Like a Slot Machine
In late November, InvestorPlace contributor Faizan Farooque argued that SNDL stock was too dependent on U.S. legalization to be a comfortable wager. If you found my colleague’s thesis convincing, then waiting for clarity would probably make sense.
Unlike most other investments, Sundial is invariably tied to politics. Against headline numbers, the storyline seems to support SNDL stock: Americans overwhelmingly support legalization.
But the devil is in the details. Drilling down the figures, you’ll notice that the green-friendly left does not have a slam-dunk case due to demographic differences. Again, Republicans have an opportunity to advantage these levers, making the legalization issue a bit more complicated than many of us initially realized.
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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.
