Reddit's Favorite Weed Stock SNDL Posts Staggering Revenue Growth, But Cantor Lowers Price Target

SNDL Inc. SNDL released its financial and operational results Monday for the second quarter ended June 30, 2022, revealing record net revenue of CA$223.7 million ($173.3 million), compared to CA$9.2 million in the second quarter of 2021, representing a 2,344% increase. 

Net loss was of CA$74.0 million for the second quarter of 2022, compared to a net loss of CA$52.3 million in the second quarter of 2021, a 41% increase.

Adjusted EBITDA loss of CA$25.9 million for the second quarter of 2022, including an adjusted EBITDA loss of CA$35.5 million from the investments segment, compared to adjusted EBITDA loss of CA$0.2 million in the second quarter of 2021.

The Analyst 

Cantor Fitzgerald’s Pablo Zuanic kept ‘Neutral’ rating on SNDL stock, lowering the price target to $3.56 from $4.80. 

The Thesis

Zuanic reduced the price target due to the lower market valuations. 

Similarly to other marijuana businesses, provided with more than $1 billion cash inflows, Sundial is also using funds to build an “ecosystem.”

However, unlike Tilray TLRY that bought low multiple, EBITDA-positive and cash-generating consumer packaged goods companies, or Canopy Growth CGC, which opted to invest in U.S. nationality via stakes in U.S. multi-state operators and brands, “Sundial opted to branch out into four separate verticals that, on the surface, seem less synergistic and have resulted in an above average level of complexity (vs. the group), in our view,” Zuanic said. 

Nevertheless, even though SNDL doesn’t have a lot of international optionality and is more focused on Canada, it’s credit portfolio could offer a path to the U.S. market, the analyst noted. 

“A market re-rating of cannabis assets and/or the company finding ways to monetize the various pieces (or create value via earnings growth in each unit), could generate upside, but we remain Neutral and prefer to focus on more direct ways to play the industry,” Zuanic said. 

“Our reduced estimates reflect more challenging dynamics across most cannabis industry segments,” the analyst concluded.

Price Action 

SNDL shares were trading 2.21% higher at $3.24 per share during Tuesday pre-market session. 

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Photo: Courtesy of Diyahna Lewis on Unsplash