Sundial Growers Inc (NASDAQ: SNDL) is headed for the top, following up on the strong gains the stock’s seen recently. While there has been no news or SEC filings from the company, with the political climate changing, things are looking up for the company. Here’s what’s going on:
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- Political Changes Send SNDL Stock to the Top
- What’s Next for Sundial Growers?
- Risks to Consider Before Buying SNDL Stock
- Final Thoughts
Political Changes Send SNDL Stock to the Top
As mentioned above, Sundial Growers is having yet another incredibly strong day in the market today. However, without news, many are wondering why.
It all has to do with political changes.
In the United States, the democrats have taken Washington. Not only will Joe Biden be the next President of the United States, democrats have control over congress, and with the Georgia runoffs yesterday, they took control over the senate.
Wait, SNDL is a Canadian cannabis grower. Why is the stock climbing on US political news?
The answer is simple. Canadian cannabis companies can’t sell their products in the United States because cannabis is illegal in the United States. However, that’s likely to change very soon.
Democratic politicians have been outspoken about their beliefs that cannabis should be legal. Not only will the people have the choice to relax with a legal option that’s less dangerous than alcohol, legal cannabis will drive incredible amounts of tax dollars.
With the democrats’ views that cannabis should be legal, and the tax dollars that are much needed for changes the politicians plan to make, there’s a strong chance of legalization ahead, meaning that SNDL will be able to export its products to the United States.
What’s Next for Sundial Growers?
I’m not sure what the deal is going to be, but I see a deal in the works for Sundial Growers. At the end of the day, the company has been very clear that it’s looking for a potential acquisition or asset sale.
In fact, the company recently announced a deal that would take it to debt freedom. The goal of the deal was to remove stipulations that would stop the company from reaching an acquisition or merger agreement, or another strategic transaction.
Now, with the company being debt free and no stipulations stopping a deal, SNDL was already likely to pen an agreement. Considering the news that democrats have taken the Senate, a deal is more likely now than ever before.
Risks to Consider Before Buying SNDL Stock
If you’re going to invest in any stock, you’ll need to be willing to accept risk. An investment in SNDL stock is no different. Before investing your hard-earned dollars, consider the following risks:
- The Financial Picture. Sure, Sundial Growers is debt free, but it costs more money to operate the company than the company is making. All in all, there’s a reason for the strategic alternatives exploration. Should the company need funding, it will likely look to capital markets to raise funds, leading to dilution.
- A Deal Has to Happen. At the end of the day, a deal needs to happen for SNDL to maintain its current valuation. Sure, the US market is likely to open up to cannabis, but that will take a couple of years to come into full effect. The company needs to make it to that point. It’s best option for doing that is an acquisition, merger, or asset sale that pads the balance sheet. Nonetheless, now is the time for it. With the US laws likely changing, the bigger players will be looking to consolidate the market.
- Penny Stock Risks. SNDL is a penny stock. As such, the stock comes with increased risk. In particular, the company’s business model isn’t quite proven. On top of that, penny stocks are riddled with volatility, making entrance and exit decisions more difficult.
The bottom line here is simple. While an investment in SNDL stock at this stage is a risky one, it also has the potential to be a highly lucrative one. With US laws likely to change over the next year or two, opening the doors to the sale of cannabis across the country, big players will be looking to consolidate the fragmented market and take control over it before it blows up.
That bodes well for Sundial Growers. Keep in mind, the company is actively looking for a suitor for a merger or acquisition deal. All in all, I believe a deal will come down the line sooner rather than later, returning tremendous value to SNDL shareholders.