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Wait for timely weakness before buying SNDL shares


Simply put, the story with Producers of sundials (NASDAQ:SNDL) has evolved. The idea that you can buy SNDL shares today and return them when the United States approves marijuana at the federal level has more or less disappeared.

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Instead, you are making a different bet when you buy the stock today. You bet he can take his high cash position – along with his recent acquisitions – and turn them into a business worth more than what the market currently values ​​for the business.

There are advantages and disadvantages to this development. On the one hand, the future of the company is no longer so dependent on events outside of its control (i.e. pot law reforms). However, with this change, the sundial will likely start trading more on its fundamentals. This is a problem, because the stocks are not really a good deal, even at what looks like a very low price at first glance. Currently, SNDL is trading around 66 cents, down more than 83% from its 52 week high.

So what’s the best approach with Sundial right now? Wait for another drop in price. Such a drop could occur, as the company could disappoint in several ways in the coming months.

The latest news with SNDL Stock

With the catalyst for legalization not being as central as it was at the start of 2021, attention with SNDL actions has shifted to recent news on mergers and acquisitions (mergers and acquisitions) with the company.

The latest news from the acquisition? Sundial purchase agreement Alcanna (OTCMKTS:LQSIF), a Canada-based alcohol retailer that also owns a 63% stake in a cannabis retailer Nova Cannabis (OTCMKTS:NVACF). Interestingly, despite Sundial’s huge unrestricted cash position, the company opted to make this a fully equity transaction.

Whether this is a decision that is in the best interests of current SNDL investors is debatable. In return for greater shareholder dilution, the company gets a business with positive cash flow. It is also possible for it to achieve cost and revenue synergies through the merger. Yet issuing so many new shares to pay off the C $ 346 million ($ 280 million) deal seems unfavorable.

Why? The pie, so to speak, is cut into numerous more slices. The upside potential of any of its catalysts becomes more limited each time the number of shares increases. With that, it makes sense why – after a brief spike following the deal’s announcement – the SNDL share price hasn’t moved much.

Several things could cause another price drop

Admittedly, the chances of buying SNDL shares at what I called a “must see price” in September are slim now. Investors today might not want to send it back above $ 1. But the idea that further disappointment pushes the stock down (even temporarily) to its total cash per share (48 cents) may also be wishful thinking.

Where is it? There are several ways that Sundial shares could fall over the next year.

First, further inaction on legalization could lead to a massive sell-off. As Democrats struggle to overcome the deadlock within the party and push through infrastructure and social spending bills, investors have all but canceled the possibility of pot reform this year. But there may be more disappointment to come when it comes to this potential catalyst. If the reform of cooking pots remains on the back burner in 2022? The market may be even less inclined to integrate it into the SNDL share.

And apart from the disappointment associated with legalization? Disappointing results from the company SunStream Bancorp company or its other direct equity investment could also lead to lower prices.

Net result with SNDL stock

Trading at a slight premium to its book value, Sundial may not be the most overvalued marijuana stock in the market. But with the high probability of another disappointment, why bother buying stocks at today’s prices?

It will take time for his fortunes to improve. However, what if you are optimistic that the actions taken by the company today will eventually pay off? Take your time before you buy.

That doesn’t mean you have to wait for it to hit a fire selling price. But waiting for the next drop to around 50 cents may be the best approach with SNDL stock moving forward.

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At the date of publication, Thomas Niel had (directly or indirectly) no position in any of the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the publication guidelines of InvestorPlace.com.

Thomas Niel, contributor for InvestorPlace.com, has been writing unique stock analyzes for web publications since 2016.


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