Those investors who added Reddit’s favorite marijuana stock, Sundial Growers (NASDAQ:SNDL), to their portfolios a year ago must be very pleased today.
The popularity of the Alberta-based company has grown significantly because of its cultivation of a particular range of cannabis strains. Its flagship brands include 1) Heal – with cannabis products used as prescription medicine; 2) Help – offering marijuana products for overall health and wellness through CBD and 3) Play – cannabis products for complementing social, spiritual and recreational occasions.
Sundial Growers is a frequently mentioned stock on Reddit’s r/WallStreetBets forum, which has over 11 million members. The retail investment forum is best known for driving up shares of heavily-shorted companies such as GameStop Corp. (NYSE:GME), which it drove through the roof last January. Then in February, Redditors did the same for Sundial, causing the stock to jump 79% in one day. This was short-lived though. By the next day, Sundial's shares closed down 19%.
Despite sinking from its peak in February, Sundial's 12-month performance surpassed some of the most popular stocks in the world, such as Tesla (NASDAQ:TSLA), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Meta Platforms (previously Facebook) (NASDAQ:FB).
Dealing With Operational Challenges, Alcanna Acquisition
Over the last two years, Sundial has had some operational challenges. Its cultivation results were poor and the company was spending too much capital - burning through roughly $15 million a month, leaving it with a peak debt of around $250 million. So, the company undertook a series of restructuring moves such as large asset sales, pulling out of six countries and laying off over 500 employees. As a result, it managed to retire all of its debt and refocus its business model.
In October, the company announced another important business move: the acquisition of Canadian liquor retailer Alcanna Inc. (OTCPK: LQSIF) for roughly $346 million. Apart from Alcanna's longstanding liquor business with a trailing 12-month free cash flow of $16.4 million on a built-out retail platform, the acquisition brings Sundial enhanced exposure with an investment in Nova Cannabis Inc. (TSE: NOVC) (OTCQB:NVACF), a publicly listed, pure-play cannabis retail operator in which Alcanna holds an approximately 63% equity interest. The acquisition is expected to close before the end of the year.
Here's how returns break down from November 2020 to the present:
Amazon is up from $3,099.40 a share to $3,696.06 for a return of 19.25%;
Facebook is up from $269.70 a share to $338.69 for a return of 25.58%;
Apple is up from $117.34 a share to $157.87 for a return of 34.54%;
Tesla is up from $489.61 a share to $1,096.38 for a return of 123.93%
And finally, Sundial is up from $0.2550 per share to $0.7452 for a return of 192.23%.
Photo: Courtesy of Joel Muniz on Unsplash