Sundial Growers Inc. (NASDAQ: SNDL) shares have advanced from $0.48 above $3.9 since the beginning of January 2021, and the current price stands around $0.95.
Fundamental analysis: Sundial’s fundamentals remain weak
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, and it is important to say that the community from the WallStreetBets forum influenced this price move.
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Since then, the price has collapsed, and the risk of further declines is still not over. Technically looking, Sundial Growers shares could advance above the current price levels this July 2021, but the risk/reward ratio is not good enough for “value†investors.
The company’s fundamentals remain weak; the cannabis revenue for the first quarter of 2021 has decreased by -36% Y/Y, while the net loss for the same period was $107 million. The net loss was negatively impacted by fair value adjustments of $103 million under IFRS, and the ability to consistently deliver high-quality inhalables will continue to be a key component of the company’s strategy.
Sundial Growers sold less than 4,000-kilogram equivalents of cannabis during the first quarter of 2021, representing a 45% decrease over the previous quarter. Positive information is that the company achieved a positive adjusted EBIDTA of $2.6 million in the first quarter, which is the first time in Sundial’s history.
“This result reflects our continued efforts to build a platform targeting attractive capital deployment opportunities while we focus on the continued improvement of our cultivation practices in an immature and rapidly changing industry,†said Zach George, Chief Executive Officer of Sundial.
Looking forward, Sundial Growers has solid growth prospects, but with a market capitalization of $1.95 billion, we can notice that this stock is not undervalued. The company is still not profitable, the book value per share is around $0.5, and lots of positive expectations have already been included in the stock price.
Technical analysis: $0.7 represents a very strong support level
Sundial Growers shares have skyrocketed above $3.9 in February 2021; since then, the price has collapsed, and the risk of further declines is still not over.
The critical support level stands at $0.70, and if the price breaks it, the next price target could be around $0.50 or even below. On the other side, if the price jumps above $1.5, it would be a signal to trade shares, and the next target could be around $2.
Summary
Sundial Growers is in a good position to grow its business, but this stock is not undervalued, and there are better long-term investment opportunities at the moment. The critical support level stands at $0.70, and if the price breaks it, the next price target could be around $0.5 or even below.
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