I’m sure you guys have all heard of Sundial Growers, so I’ll keep the company overview short and dive into my thesis on why I think they are long-term bullish. If you like this analysis, give my account a follow to be updated whenever I post!
Sundial Growers Inc (NASDAQ: SNDL) is a cannabis company engaged in the production, distribution and sale of cannabis for the medical and adult-use market. Their products are used as prescription medicines, and to enhance social, spiritual and recreational occasions. They are offered in a range of formats such as pre-rolls, oils, capsules and sublingual.
Sundial’s emphasis on using state-of-the-art indoor facilities separates them from their competitors. Taken from their 10-k, their “individual room-based cultivation formats, it gives them advantages to other growing methods by allowing efficient scaling of their production for higher and more predictable yields and multiple harvests per day.” This growing approach allows them to improve their cultivation process and end products while mitigating the risk of crop loss.
In January 2020, Sundial announced the departure of their CEO Torsten Kuenzlen and introduced Zach George as the newly appointed CEO and as well, Andrew Stordeur was appointed as President and COO. Although this news was announced last year, it takes time for shareholders to really see the effect of new management.
So far, since its restructuring in January, there has been positive movement in the company such as the acquisition of Pathway FX and Bridge Farm that shows the company’s efforts to strengthen itself and its position for long-term growth and value creation.
A key achievement thus far has been Sundial’s ability to lower their debt FY 2019-2020 by 91% and increasing their cash position by roughly 30% and this has been achieved shortly after new management has been introduced.
Zach George brings with him experience in management capacity with numerous corporate boards in order to turn around operations and implement governance policies in order to maximize shareholder value. I think he will bring great potential to Sundial in restructuring the company and setting it up for future success. His previous capital markets experience and track record for effecting corporate change will help to improve the company operations.
Andrew Stordeur first joined the company in 2018 and became President in 2018. He brings over 15 years of experience working in the fast-moving consumer goods industry both domestically and internationally and has contributed to the success of many well-known brands such as Molson Coors Beverage (NYSE: TAP) , Mars Canada, and many more. His previous experience will contribute to Sundial’s expansion and strengthen the company’s overseas position.
Sundial Growers has been experiencing low revenues and high costs that leave them with negative income for the past 3 years. In 2020 itself, despite reduced operating expenses they still reported negative income that was also contributed from the lower revenues. Investors should be wary of their financial performance as bankruptcy may be imminent if these numbers continue.
I think Sundial Growers can be a great scalp play given short interest picking up the last couple of months.
Sundial can be a long-term play after the company’s financials pick up. The restructuring will take a while before it begins to show on the financial reports so I would keep an eye out for their ER’s and continue monitoring Reddit sentiment (using this site here for the Reddit sentiment). I am hopeful that new management will be able to turn things around for this company and the recent developments the company has made so far is only the start of it.