Sundial Growers Inc (NASDAQ: SNDL) is climbing in the market, and has been through the beginning of the 2020 year. While the company hasn’t issued any news today, the run continues.
So, what’s the deal?
Well, there are three factors playing into the run here:
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- Changing Political Tides Benefit Sundial Growers
- Retail Investors are Getting Behind SNDL Stock
- The Financial Position Is Becoming Positive
- What Analysts Think About SNDL Stock
- Risks to Consider Before Buying SNDL Stock
- Final Thoughts
Changing Political Tides Benefit Sundial Growers
The first, and likely most important catalyst that’s driving growth in SNDL stock is the fact that political tides in the United States have changed in a big way. Over the past four years, republicans have largely been in control in Washington. Today, democrats have taken control.
Importantly, 83% of self-identified democrats are in favor of legalizing cannabis, and republicans don’t have the votes it takes to block the legalization of cannabis in the U.S.
Sundial Growers is a Canadian cannabis company, what does all this have to do with them? Everything!
Should the United States legalize cannabis for recreational use on a federal level, SNDL, like other Canadian cannabis growers, will be able to export their products to the country, the one that just so happens to represent the largest economy in the world.
If the United States legalizes cannabis, it will likely open a flood of revenue for SNDL.
Retail Investors are Getting Behind SNDL Stock
Recently, the biggest topic of conversation in the stock market has been the Wall Street Bets Reddit. The group of millions of retail investors has led to short squeeze after short squeeze, sending plenty of stocks on significant runs for the top.
SNDL stock was one of the targets for Wall Street Bets Redditors, who have pushed the stock for gains in multiples as of late, squeezing the shorts out of their positions. As a result, Sundial Growers stock has benefited from more awareness of their existence and bullish control of their ticker.
The Financial Position Is Becoming Positive
A year ago, there were quite a bit of questions about whether or not SNDL would even make it financially. Hopes for buyouts before bankruptcy were common.
Today, the financial picture is very different.
Over the past several months, the management team has been working hard to repay debt and improve its cash position. As a result, it now has a compelling balance sheet, one that will help it should it make an entrance into the United States market.
What Analysts Think About SNDL Stock
While retail investors seem to love SNDL stock, analysts don’t necessarily share the same opinion. In fact, there are only two analysts currently weighing in on Sundial, one of which has a Hold rating on the stock, the other rates it a Sell. That’s right, there’s no Buy ratings to speak of.
In terms of price targets, the low is $0.20 per share with a high of $0.40 per share, representing the potential for significant declines.
However, it’s important to keep in mind that these analysts have been covering the stock for some time and have not updated their coverage recently. So, these negative opinions make sense as they don’t take into account the improved cash position at SNDL.
Risks to Consider Before Buying SNDL Stock
If you’re going to invest in Sundial Growers, or any other stock for that matter, you’re going to have to be willing to accept risk. The fact of the matter is that there’s no such thing as a risk free investment. When it comes to SNDL stock, the most significant risks to consider include:
- A Speculative Bet. An investment in Sundial Growers is a highly speculative bet. At the moment, much of the value given in the company’s market cap is the result of a belief that the United States will legalize cannabis for recreational use. While there’s a good chance that this will happen, there are no guarantees, and if it doesn’t, SNDL stock could experience significant declines.
- Profitability. SNDL is not yet a profitable company. Should the company fail to reach profitability before its cash dries up, it may look to public markets as a way to raise funds, resulting in the dilution of existing shareholder value.
- An Arguably High Valuation. Many experts say the recent run in value has been the result of fear of missing out (FOMO), and that the valuation will come back to earth relatively soon. While this is yet to be seen, it is a possibility.
While there are risks to consider, those risks are starting to fade. After paying off debt and creating a compelling balance sheet, the management team at Sundial Growers has set itself in a solid position to take advantage of opportunities as regulatory changes take place around the world.
Moreover, with retail investor support behind the ticker, who knows just how high SNDL could go.