SNDL Stock Forecast: How High Can It Go Amid Reddit Short Squeeze?

Sundial Growers (SNDL) stock rose over 12 percent on June 23 and closed exactly at $1. The price level is important for the penny marijuana company because it hasn't closed above $1 since the first week of June. SNDL was once a top discussion topic on Reddit group WallStreetBets. It's getting popular among Reddit traders again. What’s the forecast for SNDL stock and how high can it go as Reddit traders attempt short squeeze 2.0?

The spike in SNDL stock on June 23 was largely due to speculation about it being targeted by WallStreetBets. There wasn’t a similar rally in other marijuana names and Tilray, the largest marijuana company, gained just about 1 percent.

According to the data from Fintel, SNDL had a short volume ratio of around 26 percent on June 23. While it's the highest ratio this week, there hasn’t been a major change in the short interest. Over the last 10 days, the stock’s short volume ratio has been above 20 percent consistently.

Looking at the “magic” that Reddit traders have done with some of the other names like GameStop (GME), AMC Entertainment (AMC), and Clover Health, the mere mention of the stock on WallStreetBets triggers a buying spree. SNDL features among the top 20 discussion topics in the group. Clover Health is the most popular stock on WallStreetBets currently.

Like many other Reddit names, Wall Street isn't too bullish on Sundial Growers. Its median target price of $0.71 is a 28.7 percent discount over the current prices. The stock has three sell and three hold ratings. None of the analysts have a buy or equivalent rating. However, as is the case with some of the other stocks like GME and AMC, Reddit traders can pump stocks way above what analysts think they are worth.

A recent post on WallStreetBets talked about the possibility of SNDL “exploding.” Another post talked about the fact that Connecticut Governor Ned Lamont has signed the law legalizing adult-use marijuana in the state. Connecticut has become the 19th U.S. state to legalize marijuana even though it's still illegal at the federal level.

However, the federal legalization of marijuana appears to be on the table. While SNDL wouldn’t be an immediate beneficiary of the legalization as its operations are focused in Canada, the company might look at acquisitions in the U.S. markets.

Thanks to the short squeeze 1.0 triggered by Reddit traders in the first quarter of 2021, SNDL raised millions of dollars by selling shares and now has more cash than Tilray, the largest marijuana company.

SNDL is using the cash to invest and lend to other marijuana companies. The bullish theme for SNDL revolves around the cash on the balance sheet because the core business hasn’t been doing great. That said, management is streamlining the business and is working on a turnaround.

Reddit traders have taken some stocks literally to the moon and their valuations look out of sync with the fundamentals. However, given the strong momentum in marijuana stocks and the renewed interest from WallStreetBets, SNDL can run up another 20 percent from these levels.