To The Moon

$Sundial Growers Inc.(SNDL)$

2022 has been hard going for many industries operating against a backdrop of inflation running hot and rising interest rates. The negative macro developments affected all corners of Sundial’s () latest quarterly report.

The Canadian cannabis company dialed in total net revenue of C$17.6 million, amounting to a ~29% sequential drop, as seasonal slower sales hit the top-line. Net cannabis cultivation dropped by 31% quarter-over-quarter to C$8.8 million as both wholesale and provincial distributor sales took a hit – falling by around 64% and 14% Q/Q, respectively.

As the company postures toward the premium inhalables categories and moves away from discount offerings, Canaccord analyst sees further “near-term challenges” for the business. “That said,” the analyst added, “we do believe that new product launches will help to drive modest sequential gains into provincial sales channels beginning in FQ2/22 (with 159 new product listings secured YTD).”

Retail sales also dropped sequentially – by 24.5% from C$10.0 million in F4Q21 to ~C$7.5 million. The company presently boasts 183 cannabis retail locations in Canada, although going by previous noises made by management, given “retail saturation” in the majority of significant markets, Mir expects Sundial will “slow the pace” of store openings.

On the bright side, Cash opex fell from C$13.1 million to C$11.9 million, a sequential improvement of 9%. However, put together with the weak top-line, “muted margin profile,” and reduced income from the company’s investment arm, adj. EBITDA showed a loss of (C$0.6 million) in the quarter compared to a profit of ~C$18.4 million in FQ4/21, and falling well short of Mir’s forecast of ~C$10 million.

So, not much to shout about, as Mir reiterated a Hold rating and $0.6 price target. Still, investors will be locking in gains of 45% in a year’s time, should the figure be met. (To watch Mir’s track record, )

Over the past 3 months, only one other analyst has reviewed SNDL’s prospects, and they agree with Mir’s prognosis, which gives the stock a Hold consensus rating. Combined with the Canaccord analyst’s objective, the average price target stands at $0.59, suggesting 12-month upside of 43%.