Sundial Growers (SNDL) Stock Keeps Rising in 2021 After the Crash

Sundial Growers (SNDL) was one of the meme stocks that gained momentum among retail traders on social media. The stock is down 82 percent from its 52-week highs, but it's still up 50 percent so far in 2021. What’s the forecast for SNDL stock in 2021 and will it go up or fall more?

In the second quarter, Sundial’s net marijuana revenues fell by 55 percent YoY to 9.2 million Canadian dollars. The company's sales have been declining steadily in recent quarters. The company is restructuring its operations to focus on value-added marijuana products. Sundial reported an adjusted EBITDA loss of 0.2 million Canadian dollars in the second quarter compared to an adjusted EBIDTA loss of 3.9 million Canadian dollars a year ago.

According to MarketBeat, analysts' average target price is $0.73 for SNDL stock, which is 4 percent above its current price. Among the five analysts tracking SNDL, four recommend a hold, while one recommends a sell. None of the analysts recommend a buy. Their highest target price of $1.15 is 62 percent above the stock's current price, while their lowest target of $0.40 is 44 percent below.

Sundial Growers is a marijuana firm based in Canada. The company spent most of the last year restructuring by raising cash and reshaping into a two-pillar business model that relies largely on acquisitions. In doing so, Sundial diluted existing shareholders by raising its share count by over 1 billion shares, or over 1,500 percent from a year ago.

Sundial completed the acquisition of Spiritleaf Retail Cannabis Network and increased its investment in SunStream Bancorp by 350 million Canadian dollars. SunStream is a joint venture between Sundial and the SAF Group, which aims to create a SPAC. As of Aug. 9, the company had 1.2 billion Canadian dollars in cash and no debt. This makes Sundial one of the most cash-rich marijuana stocks and should give it enough flexibility to execute on its several growth plans.

In my view, we’re done with the sell-off and SNDL stock might recover now. According to Sundial, its net asset value per share was $0.66 as of June 30, which isn't far from SNDL's current market price of $0.71.

With Democrats gaining control of the Senate and President Biden's election win, the chances for marijuana legalization have never been brighter. If the federal government acts, Canadian licensed producers like Sundial will be allowed to access the lucrative U.S. marijuana market.

On Aug. 17, Canadian marijuana company Tilray said that it acquired the majority of the outstanding senior secured convertible notes of U.S. marijuana retailer MedMen Enterprises. Tilray stated that the $165.8 million deal would give it a footprint across the U.S. if marijuana gets legalized at the federal level.

Sundial has made acquisitions an important component of its future strategy. Tilray's approach might serve as a model for Sundial as well. Sundial has created an investment pillar that seeks acquisition targets.