Sundial (SNDL) has been a firm favorite amongst Robinhood investors this year, and at one point earlier in 2021, the stock showed year-to-date gains of over 700%. The stock has since retreated to a more realistic price, a factor - along with an improved balance sheet - taken into account today by Canaccord analyst Shaan Mir.
“We believe SNDL’s cash balance presents an opportunity to deploy capital into accretive investment opportunities and generate returns past our implied ~US$1.4B valuation,” Mir said. “Given a recent pull-back in the share price, we believe Sundial is currently trading near our implied valuation.”
Accordingly, the analyst upgraded Sundial’s rating form Sell to Hold, and bumped the price target from $0.65 to $0.7, which is roughly the price the shares are going for right now. (To watch Mir’s track record, click here)
Mir’s reevaluation follows on from Sundial’s latest quarterly statement, for F1Q21. Specifically, EBITDA came in positive at C$3.2 million, but Mir says it was only due to a “~9% decline in sg&a spend and the inclusion of ~C$8.0M of realized investment gains in the quarter (the first period of inclusion for investment income).” Otherwise, the company would have delivered a ~(C$4.7M) adj. EBITDA loss, which more closely resembles Mir’s ~(C$4.3M) estimate.
The top-line figure was a disappointment, as revenue dropped by 29% year-over-year to C$9.89 million, which is also below the C$13.9 million generated in F4Q20.
Management has put the sales drop down to “continued growth in the discount segment,” which relative to peers is an area Sundial “has opted to under-index.” Seasonality and COVID-19 restrictions were also noted as factors in the slowdown of sales.
Looking ahead, management said it favors increasing the focus on higher-margin SKUs, and will therefore “limit the offering of discount products.”
Mir thinks the discount section is one which continues to drive market growth and due to the move away from the segment has now modeled in “more conservative market share estimates in the near term.”
Mir’s FY2022 estimate now calls for revenue of C$143.8M vs. the prior forecast of C$160.8 million.
Turning now to the rest of the Street, where there are no Buy recommendations for SNDL at present. The stock’s Moderate Sell consensus rating is based on 2 Holds and Sells, each. The average price target sits just above Mir’s, and at $0.75 suggests shares will gain 8% over the next 12 months. (See SNDL stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.