Sundial Growers (SNDL) looks like a compelling buy at these levels, here’s why:
They rose capital in February at $1.50 which traditionally acts as a floor for the stock.
- Trades at 2x tangible book value compared to 12x tangible book value at cgc and acb.
- Had a nice high volume spike in February. It’s very common for the big mountain rise to come roughly four months after the initial mole rise on big volume. We’re roughly 4 months from when the initial run up happened implying the Daddy run up could near.
- Daily short volume remains very elevated with average daily short volume consistently around 50% although we were about 40% on Friday (which is still quite high) https://www.shortvolume.com/?t=SNDL Short interest is 13.78% as of May 14th implying shorts are shorting (selling shares they don’t own) in the morning and rebuying in the afternoon in hopes of spooking others out of their shares. This implies the short interest is quite underreported. If longs can hold strong and bring higher price action towards the end of the day these shorts are going to be overwhelmed with the sp, not to mention potential margin calls as SNDL increase it’s volatility and holding requirements. Once we see potentially see the automatic covering is when the party really starts 🎉
- We had nice big volume up days of 622 million in May 28 and 894 million in June 3rd compared to Friday’s down day with only 372 million shares traded. Another bullish sign that the big volume days were also very green days while the red day was on muted volume.
- Stick with equity if you can. I predict the big institutions who are buying into SNDL are selling a boatload of options and ensuring the price stays under their expiration so they can collect premiums while lowering their cost basis. It’s happened the last two weeks. This can’t go on forever as the stocks price should match it’s value which imo is in the $4+ range (about 8x tangible book value) sooner rather than later.
- SNDL has only announced positive news and quality acquisitions since its peak in February with preferred debt and 19% equity stake in Indiva which owns many brands including the #2 gummy producer in the U.S. WANA Gummies. Sundial also acquired a large stake in The Valens at a deep discount compared to today’s price. Furthermore, SNDL acquired all of Inner Spirit which has the most retail cannabis stores in Canada at 80 stores. Sundial will undoubtedly replace current inventory with their own solidifying their strength as the only true vertical cannabis operator from growing, processing and extracting, to store front selling. As the industry continues to mature the margin increase Sundial will see is out of this world. Not to mention the free publicity from Reddit and Robinhood. For SNDL to consistently be a top 5 stock on Robinhood with a market cap of $2 billion is unheard of. The excitement around the stock will continue to help its real world performance.
- Sundial could very likely be acquired at any moment with 0 debt, over $1 Billion in assets including $900 million in cash. SNDL is a massive acquisition candidate at a fundamental level as it only trades at 2x book value with positive operating profit last quarter compared to CGC and acb which trade at 11x book value.
- As mentioned, Sundial had positive operating profits for the first time this quarter (primarily through passive security appreciation which shows no sign of stoping). If SNDL can continue the trend it will be picked up by more and more non weed hedge funds that require multiple quarters of positive operating profit before they can be incorporated.
- When someone buys potx or other weed etfs they automatically purchase 4.35% sundial and 5.6% of the Valens as those are the current weightings in the fund. Not to mention Indiva at a lower %. For every dollar that flows into PotX more than 10% or more goes to SNDL related companies. Every dollar that flows into weed funds in the future will help sundial. Imagine the money that will flow into weed companies and these funds once federal legalization is passed.
- The share count of 1.86 Billion is no more than Palantir or NIO which sit at 1.88 and 1.7 Billion shares, respectively.
- SNDL currently has 4.79% institutional ownership compared to over 15% at CGC and acb. As time goes on this will continue to rise. It’s pretty normal for a developed company to have over 60%+ if not 80% institutional ownership, especially at a book value like Sundials. Book values traditionally act as a permanent floor for the stock, especially with SNDL’s positive operating profit and expected earnings growth and sales growth of 50% in 2022.
- The meme stock craze is not close to over. It’s just now being reported again on tv. Excitement is brewing and as normals continue and hear about it and get in, the avalanche should build higher than February’s peak. Sundial differentiates itself from the other meme stocks with it’s strong balance sheet and excitement around the up and coming industry. To me, investing in Sundial here combines level head value investing with the excitement of a new industry and the loyal meme craze.
Hope some people found this background on the company helpful. Sundial seems to have a great runway to take off (fundamentally and technically) not to mention future catalysts like potentially breaking into the drinks market and as well as having many more medicinal and mental health uses. It’s undeniable that weed is losing it’s negative stigma and is way more popular in entertainment and social settings than it has ever been. Only a matter of time before you can order it at a bar or sporting event. It’s the trend of the youth and it’s just getting started. I’m here to answer any questions. Not financial advice.
Jump To The Original Source