Sundial Growers: High-Quality Way to Play US Cannabis

Sundial Growers Rides The Cannabis Bull Market To New Highs

Jan. 21, 2021 10:13 AM ETSundial Growers Inc. (SNDL) 

Summary

• Sundial Growers presents an investment opportunity as it expands into new Canadian markets and rolls out new products. 
• Sundial Growers has recently restructured and has a clean balance sheet with no debt.
• The fundamental and technical metrics on Sundial Growers, along with this bullishness in the markets, present an interesting investment opportunity.
• I predict a price stabilization of $1 for Sundial Growers in the next six months for a potential gain of about 45%.
• Sundial Growers is a high-risk investment.

 

Summary

- Sundial Growers는 새로운 캐나다 시장으로 확장하고 신제품을 출시함에 따라 투자 기회를 제공합니다.

- Sundial Growers는 최근에 구조 조정을했으며 부채가없는 깨끗한 대차 대조표를 가지고 있습니다.

- 시장에서의 이러한 강세와 함께 Sundial Growers에 대한 기본 및 기술적 지표는 흥미로운 투자 기회를 제시합니다.

- 약 45%의 잠재적인 이득이 예상되며 향후 6개월 동안 Sundial Growers의 가격 안정화가 1달러가 될 것으로 예상합니다.

 

 

There has been a lot of buzz about the increasing bullishness surrounding cannabis stocks in the US stock market. The outcome of the recent Presidential elections has fueled this trend, as well as recent announcements from Canadian cannabis companies about expansion into American markets. How will you invest in these new emerging markets and profit from the bullish conditions?

It was recently announced that Aphria (OTC:APHA) and Tilray (TLRY) will merge and, through a partnership with Anheuser Busch and SweetWater Brewing, enter the US market with THC and CBD drinks. Hexo (OTC:HEXO) made a similar play by forming a partnership with Molson Coors and introducing a new CBD drink in Colorado. Sundial Growers (SNDL) has also received a lot of attention lately and we should look closer at their performance in Canada, as well as their mindset for expansion into US markets.

Because the United States does not have national legalization, the cannabis industry here is still emerging. CBD, on the other hand, is legal throughout the US and the market is growing. If you want to play cannabis in your portfolio and take advantage of the bullish conditions, Canada has the only nationally legal cannabis market. You can buy stocks and follow the Canadian cannabis companies, which trade on the NYSE, and rank their performance within Canada and their potential for growth outside of Canada. It is best to understand this emerging industry now, before US legalization.

This article is the first in a series, which will guide you through the emerging industry and its publicly traded companies. Future articles will tackle different cannabis companies, their stock and company performance, as well as cannabis support stocks and ETFs. Today we will look at Sundial Growers an underdog in the scene which needs attention from investors and may present a great setup for the year.

When watching and buying cannabis stocks, it is important to keep track of the sector and industry of the company. You should know what the company does and whether it is a cannabis company or a cannabis support company, also whether it operates in the United States. Cannabis stocks trade in a variety of sectors and industries. If you want to appropriately diversify your portfolio and play the entire cannabis industry, you must learn the specifics and the basics.

The Fundamentals: Sundial Growers is Expanding into New Markets

We start with the fundamentals of the Canadian company Sundial Growers. The first thing to know is that they operate in all Canadian provinces, but not in the United States. It is important to understand a company's role in the global and American cannabis industries. If America legalizes cannabis, then Sundial will expand. Their CBD assets may allow them to expand sooner, just as Aphria, Tilray, and Hexo.

They have recently (2019) acquired assets in the CBD/hemp industry which has given the company access to larger markets, beyond Canada. Their CBD products are available throughout Canada. CBD has been legal globally for some time. It is basically a cannabis plant without the psychoactive element or THC. CBD is used in medicine. Hemp, the plant from which it derives, cane be used in the manufacturing of plastics, papers, and clothes. The bottom line is that Sundial Growers has a lot to gain in the American cannabis industry and global CBD industry. Accordingly, their stock will likely trend up with news of United States legalization. They have already entered the CBD industry and brought out new high-end cannabis product lines.

Their new high-end cannabis line is being sold in all provinces of Canada. Sundial Grower's has about 3% to 4% of the Canadian market. The new product line attracts the connoisseur clientele and sells at a higher price-point. The consumers in the new legal cannabis market are critical of the products for sale and Sundial Growers has stepped up to meet consumer demand. This attention to consumer expectations insures growth and success for their company.

Let's consider exactly what Sundial Growers does in the cannabis industry in order to judge their potential for growth and price stabilization. They grow cannabis at professional grow facilities, have it processed, then sell it at dispensaries throughout Canada. Their grow facilities produce high grade cannabis, which is either packaged for resale or processed into hash oil for resale. The hash oil is set into hand held vapes or used as concentrates. Their products meet industry standards and are considered high quality. The name of their game is producing cannabis at the lowest price per gram, having it processed or packaged at an efficient price, and making the most revenue from sales in dispensaries. New markets, like American legalization and Global CBD, will give Sundial Growers another opportunity for rapid growth.

The Fundamentals: Liquidity, Debt, and Comparison to Others

The Q3 corporate financial documents found on Sundial Grower's website indicate that they are successful in their model of growing and selling cannabis. Recent articles about their company's performance show that their debt is low, although their financial moat is small. According to a recent report from Sundial Growers, the company is debt free and has a strong balance sheet. The bottom line here is that they must only continue to perfect what they are currently doing, while expanding into new markets.

Sundial Growers is a small cap corporation which trades in the Health Care industry within the Biotechnology sector. Their index is NASDAQ. In their corporate presentations, they openly compare their size and performance to the other Canadian companies which are publicly traded on the NYSE: Canopy Growth (OTC:CGC), Aurora Cannabis (OTC:ACB), Tilray, Aphria, OrganiGram Holdings (OTC:OGI), Hexo. I will cover the performance of the sister stocks in future articles. Let's look at a snap shot of the group during Q3 performance.

(Price in Millions)	CGC	ACB	TLRY	APHA	OGI	HEXO	SNDL
Enterprise Value	10912	2633	2383	2193	449	395	347
Cash	1722	298	201	400	76	192	63*
Debt	612	565	678	484	115	71	0*
P/B Ratio**	3.12	.87	9.53	1.96	1.56	1.56	2.61

*Q3 2020 adjusted for December 2020 restructuring.

**Q3 2020 P/B Ratio from Finviz.com. All other numbers from SNDL Q3 corporate presentation.

In comparison to some of the other cannabis companies, Sundial Growers is one of the underdogs of the bunch. According to their Q3 reports, their revenue is down 36% to 12.9 million. We must consider that post-COVID their revenue should increase as the public economy reopens. Their recent uptrend is also due to recent expansion, i.e. the release of a new high-end product line and expansion into the CBD industry.

The Technical Analysis: Stable RSI, ADX Buy Signals, Volume Increase, Above Moving Averages

I move now to the technical analysis of Sundial Growers. Since the new year, during the recent rally from the election, their stock price has been moving up and returning to a previous high. Let's look at this recent uptrend on a 3-month chart.

Sundial's stock price has experienced two breakouts since November and it may be headed for a third. Its Relative Strength Indicator (RSI) has been stable, which means there is room to buy without sudden price destabilization. The stock's On Balance Volume (OBV) has risen significantly and there have been several ADX buy signals. The price has traded over its 20/50/200 moving day averages. Its 3-month performance is almost 200%. These technical signals show an uptrend, although there are risks.

The stock is currently trading between .64 and .74. Its all-time high is 12.22 and the range for 2020 was .014 - 3.88. Its average 50-day volume is 357 million shares. There has been an increase in trading volume over the last month. About 11% of its shares are held by large institutions. If this number increases along with volume, it will become a strong buy signal.

To confirm this trend, here you will find a 6-month chart.

Seeing this uptrend, one should ask how to invest in the stock and what the strategy should be. This is not a stock for short selling and there are some inherent risks in trading this stock. The strategy would be to long-hold this stock. Buy it at the best entry price and reload it as the price rises. This stock does not have robust options activity yet, but a nose-bleed call option (one with a long expiration date) may be a good way to profit from its price movements over time.

The Risks

I now turn to the risks of investing in Sundial Growers. Because of the risk, one should only invest money which has been earmarked for high-risk investments. Sundial Growers trades at under $1 per share. Any stock that trades under a dollar can destabilize very fast and thus create a loss due to volatility.

If the stock continues to trade at under $1 per share, the stock will undergo a reverse split, according to recent SEC filings from Sundial Growers. The reverse split presents a further risk because the stock price may continue to destabilize after the split. Hexo recently underwent a reverse split and, after a month or so, their stock price is now stable between $6 and $7 per share. We would hope for a similar outcome with Sundial Growers, but there is a risk of the opposite outcome. It is also unclear when and how the company will enter the American cannabis and CBD industries.

If you play a high-risk stock, only play it in proportion to what you can lose. Knowing these risks, I would recommend a strategy using this stock and its sisters. In addition, one should buy the support stocks to ensure daily growth from the entire investment basket.

Conclusion

To conclude, Sundial Growers is undergoing expansion in their business, has a new debt free balance sheet, and a recent uptrend in their stock price. The potential for American cannabis legalization has all cannabis stocks on the rise. Sundial Growers has been experiencing daily movements and is likely to hit a $1 or above price stabilization with 45% gain over the next six months. I recommend investment in this stock, according to its technical signals and fundamental metrics. The stock is high risk, so I suggest also investing in Sundial Grower's sister stocks in order to create a balanced investment basket. The potential for American legalization has many investors looking closer at the publicly traded cannabis stocks.

 

출처: seekingalpha.com/article/4400154-sundial-growers-rides-cannabis-bull-market-to-new-highs

Sundial Growers Rides The Cannabis Bull Market To New Highs (NASDAQ:SNDL)

 

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의견 

 

- 대마초는 8천억 ~ 1천억 달러의 필수 소비재 시장이지만 합법적인 판매는 200억 달러뿐입니다. 나머지 시장은 불법입니다. 전체 산업이 성장하는 것 외에도 미국은 불법 판매가 합법적인 판매로 전환되면서 빠르게 성장할 시장입니다. 

 

- 40%이상의 마진으로 성장하는 고성장 필수 소비재가 어디까지 성장할까요? 2021년 내 주 합법화 계획, 수입 및 잠재적인 연방 조치에 대한 긍정적인 소식에 따라 다시 평가 될 것이라고 생각합니다.