Insights

Why Sundial Growers Stock Plummeted 32.9% in April

What happened
Shares of Sundial Growers (NASDAQ: SNDL) fell 32.9% April, according to data from S&P Global Market Intelligence. The Canadian cannabis company closed March 31 at $0.70, then gradually fell to a low of $0.4694, where it closed at the end of April. That wasn’t far off from the company’s 52-week low of $0.40 a share and a long way from its 52-week high of $1.49.
Image source: Getty Images.

So what
It wasn’t a great month for cannabis stocks as the EFTMG Alternative Harvest Cannabis ETF was down more than 8% in that period, but Sundial had problems on top of that. It wasn’t just one thing that drove the company’s stock steadily downward, but a series of problems.
The first came when the company postponed its 2021 annual report not once, but twice. On March 28, the company said it wouldn’t be able to meet the scheduled filing date of March 31 for the report, pushing it back to April 14, citing difficulties in getting its audit prepared.
For that, the Alberta Securities Commission slapped the company with a management cease-trade order (MCTO) on April 1, restricting CEO Zachary George and chief financial officer Jim Keough from trading in any Sundial securities until the MCTO had been lifted. On April 13, the company pushed back the report further, saying it would be released later than April 29. On April 27, the annual report finally came out, and the news wasn’t all that encouraging.
Last year, Sundial reported 2021 revenue of 56.1 million Canadian dollars ($43.6 million), down by 8% from 2020, though at least the fourth-quarter revenue of CA$22.7 million was up 63% year over year. The company also lost CA$230.2 million in 2021 compared to the CA$206.3 million it lost the prior year. It lost CA$54.8 million in the fourth quarter, a slight improvement from the CA$64.1 million it lost in the same period in 2020.
One other concern investors might have is the company’s focus. It not only sells cannabis, but it also has a segment, SunStream Bancorp, that acts as a cannabis investment banking arm. And the company has stakes in pot grower Village Farms International and marijuana derivatives producer The Valens Company that aren’t paying off yet. In the fourth quarter, Sundial said it lost CA18.8 million from its investments.
Now what
Investors will likely stay wary of Sundial until the company sees a couple of quarters of growth in revenue and net income. The stock is down more than 43% over the past year. The key for investors will be how its recently completed CA$320 million purchase of Alcanna works out.
Alcanna is Canada’s biggest alcohol retailer with 171 stores, and has a majority stake in Nova Cannabis, which has 68 retail locations in the provinces of Alberta, Saskatchewan, and Ontario, so the deal, completed on March 31, has the potential for synergy. The purchase gives Sundial the most retail outlets of any Canadian cannabis company at 180.
Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Village Farms International Inc. The Motley Fool recommends The Valens Company Inc. The Motley Fool has a disclosure policy. –

What happened

Shares of Sundial Growers (NASDAQ: SNDL) fell 32.9% April, according to data from S&P Global Market Intelligence. The Canadian cannabis company closed March 31 at $0.70, then gradually fell to a low of $0.4694, where it closed at the end of April. That wasn’t far off from the company’s 52-week low of $0.40 a share and a long way from its 52-week high of $1.49.

Image source: Getty Images.

So what

It wasn’t a great month for cannabis stocks as the EFTMG Alternative Harvest Cannabis ETF was down more than 8% in that period, but Sundial had problems on top of that. It wasn’t just one thing that drove the company’s stock steadily downward, but a series of problems.

The first came when the company postponed its 2021 annual report not once, but twice. On March 28, the company said it wouldn’t be able to meet the scheduled filing date of March 31 for the report, pushing it back to April 14, citing difficulties in getting its audit prepared.

For that, the Alberta Securities Commission slapped the company with a management cease-trade order (MCTO) on April 1, restricting CEO Zachary George and chief financial officer Jim Keough from trading in any Sundial securities until the MCTO had been lifted. On April 13, the company pushed back the report further, saying it would be released later than April 29. On April 27, the annual report finally came out, and the news wasn’t all that encouraging.

Last year, Sundial reported 2021 revenue of 56.1 million Canadian dollars ($43.6 million), down by 8% from 2020, though at least the fourth-quarter revenue of CA$22.7 million was up 63% year over year. The company also lost CA$230.2 million in 2021 compared to the CA$206.3 million it lost the prior year. It lost CA$54.8 million in the fourth quarter, a slight improvement from the CA$64.1 million it lost in the same period in 2020.

One other concern investors might have is the company’s focus. It not only sells cannabis, but it also has a segment, SunStream Bancorp, that acts as a cannabis investment banking arm. And the company has stakes in pot grower Village Farms International and marijuana derivatives producer The Valens Company that aren’t paying off yet. In the fourth quarter, Sundial said it lost CA18.8 million from its investments.

Now what

Investors will likely stay wary of Sundial until the company sees a couple of quarters of growth in revenue and net income. The stock is down more than 43% over the past year. The key for investors will be how its recently completed CA$320 million purchase of Alcanna works out.

Alcanna is Canada’s biggest alcohol retailer with 171 stores, and has a majority stake in Nova Cannabis, which has 68 retail locations in the provinces of Alberta, Saskatchewan, and Ontario, so the deal, completed on March 31, has the potential for synergy. The purchase gives Sundial the most retail outlets of any Canadian cannabis company at 180.

Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Village Farms International Inc. The Motley Fool recommends The Valens Company Inc. The Motley Fool has a disclosure policy.

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