Sundial has rallied over 300% YTD. Since the beginning of February, the company has surged over 100%. Here are three catalysts that made Sundial so popular lately.
Sundial Growers Inc, along with other cannabis stocks has also seen a great headwind coming from the positive sentiment of legalizing marijuana in 2020 and early 2021. On February 5, the state of Virginia passed a bill to legalize recreational marijuana, becoming the 16th state and the first in the South that will accept cannabis as a consumer good.
Cannabis stocks rallied last Wednesday when GW Pharmaceutical (NASDAQ: $GWPH) got acquired by Jazz Pharmaceuticals PLC (NASDAQ: $JAZZ) for a staggering $7.2 billion. GW Pharma is also the first company to get a cannabis-based drug approved by the U.S Food and Drug Administration.
Sundial’s management has currently taken advantage of the sharp increase in its stock price to issue USD$74.5 million worth of shares. The company is trying to repay debt and improve the company’s cash position to have a clean balance sheet before getting the promising green light to enter the much more lucrative U.S market in the future.
Sundial’s investors should, nevertheless, be very careful to hold or to buy the stock, as the company is nowhere near profitability yet. Sundial is also transitioning from a low-margin wholesale model to a higher-margin retail model, which will not be realized overnight – and certainly not without a cost.
In the September-ended quarter, the company’s sales year-over-year were more than halved, with the operating loss of 71.4 million Canadian dollars. Yet, its market cap is currently worth a dazzling 4.1 billion.
Buyer beware – this may be yet another irrational Reddit crusade.