Producers of sundials (NASDAQ:SNDL) is down about 37% since I last wrote it in March. It’s a bitter pill for bullish retail investors who stick with the company. But it must be music to the ears of those equally passionate investors who short interest on SNDL share.
Currently trading at $ 1.10, SNDL stock falls into the penny stock category. And as such, it caught the attention of a committed group of private investors known as Redditors. Sundial was part of the “same stock” craze in February 2021, although playing a much smaller role than its A-lister brethren.
But even though the stock is down from its previously “high” price of over $ 2 per share, Sundial remains a very active stock among retailers. I say this because, as I mentioned in a previous article, the SNDL is almost ignored by institutional investors.
This does not mean that every investor should avoid sundial producers. However if you’d rather take a more ‘set it and forget it’ approach to your investments, there are better options, including a number of cannabis-focused ETFs.
The sundial makes a rational pivot
You’ve probably all heard the idiomatic definition of insanity: do the same and expect a different result. Therefore investors can be happy that Sundial is trying to try something new.
Without giving up their cultivation efforts, they pivoted to focus on a higher margin some products (like vapers). And the company also becomes an investor in other cannabis companies. It’s an intriguing model, but it’s far too early to say if it will work for the sundial.
And one thing that concerns me is that being the lender of last resort for many of these companies is an easy way to burn off the pile of money the company has amassed in 2020. More as my colleague GS Early wrote in a recent article for Investor place, the The US market does not hurt venture capitalists and investment bankers who are open to investing in viable cannabis companies.
The wins were not an event
As many cannabis companies continue to generate appalling profits, you might imagine investors would be “over the moon” when it comes to Sundial’s quarterly registration with investors. One of the surprising aspects of the report was positive Adjusted EBITDA.
While this shouldn’t be seen as the end of everything, being everything for any stock, you’d think it would be enough to give the SNDL stock some love. But the stock barely budged. And that’s in large part because there is still a lack of the juice that has just been on the radar of institutional investors.
SNDL stock remains heavy
The last time I wrote about SNDL stock, I thought it was a heavy burden for retail investors. Sundial is showing a little more interest from institutional investors, but it is not significant. I come back to the GS Early article reminding investors that ‘big money’ investors are probably watching the rules of the game. But they probably won’t do more than a little window shopping until they have a better idea of which companies are poised for long-term success.
It is therefore difficult to see the SNDL share moving significantly upwards in the short term. But at this point, the cannabis industry in general feels like it’s on hold. Canada continues to face pandemic restrictions that give the retail cannabis industry a sense of one step forward and two steps back.
In more positive news, the United States Congress could introduce legislation to legalize marijuana. But even though the United States opens tomorrow, not all cannabis companies are ready or able to claim a piece of the pie. And then again, it appears that Sundial is not presenting investors with a clear strategy on how it will enter the US market.
More a business than an investment
If you are looking to trade SNDL shares, there might be a case. The stock price has consolidated around its 200-day simple moving average. If it goes above, traders could find themselves on the positive side of a swing trade. But it looks more like a bet than a certainty.
As of publication date, Chris Markoch did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.
Chris Markoch is a freelance financial writer who has covered the market for seven years. He has been writing for Investor Place since 2019.