Sundial Growers Inc. (NASDAQ: SNDL) shares have weakened from their recent highs above $0.80, registered at the beginning of September 2021, and the current price stands at $0.68.
The focus remains on restructuring
Sundial Growers engages in the production, distribution, and sale of cannabis products for the adult-use market; the company was incorporated in 2006 and is headquartered in Calgary, Canada. Sundial Growers shares have skyrocketed above $3.9 in February 2021; since then, the price has collapsed, and the current share price stands at $0.68.
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The company’s fundamentals remain weak; the cannabis revenue for the second quarter of 2021 has increased only 8% compared to the previous quarter, while the net loss for the same period was $42 million. Second-quarter performance was impacted by retrenchment in cultivation activities and refusal to push suboptimal products into the market.
Sundial Growers has focused on restructuring activities that include workforce and other cost reductions, while the ability to consistently deliver high-quality inhalables will continue to be a key component of the company’s strategy. Zach George, Chief Executive Officer of Sundial Growers, said:
Sundial has no interest in pursuing unprofitable revenue growth, but we are unwilling to seek the maintenance of market share at all costs. This has allowed us to continuously improve our cultivation outcomes and remain focused on best practices to deliver great results in potency, yield, and terpenes, as mentioned previously.
Positive information is that if we compare the first half of 2021 results, adjusted EBITDA from continuing operations was $2.4 million compared to a loss of $12 million for the six months ended June 30, 2020. It is also important to mention that a research firm BDSA expects that cannabis sales in the US could advance above $40 billion by the 2026 year.
Legal cannabis sales have advanced above $17 billion in 2020, indicating 45.5% growth compared with the 2019 year, and the market is set to expand further as more and more states clear legal hurdles against the use of cannabis.
This is certainly positive information for Sundial Growers, the company would set its sights on the US market, and there is room to focus its efforts on the more profitable sides of its business. The US market has the potential to be the largest market in the world and is the easiest foreign market to access from a logistical standpoint.
Looking forward, Sundial Growers has solid growth prospects, but with a market capitalization of $1.40 billion, we can notice that this stock is not undervalued. The company is still not profitable on a yearly basis, and until the revenue base expands, the stock will not obtain more investor interest.
Bears in control of SNDL
Sundial Growers shares remain under pressure, and if the price falls below $0.60 support, it would be a strong “sell” signal. On the other side, if the price jumps above $0.80 resistance, it would signal trading shares, and the next target could be at $1 or even above.
Summary
Sundial Growers has solid growth prospects, but the stock will not obtain more investor interest until the revenue base expands. Sundial Growers shares remain under pressure; still, if the price jumps above $0.80 resistance, the next target could be at $1.
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