Sundial Growers (SNDL) - Get Sundial Growers Inc. The reportlong-awaited Q4 earnings were released on April 27th. The next day, the company held its earnings call.
Although the results appeared to be satisfactory, the market reaction was negative. Here, you should look deeper into Sundial''s earnings and discuss investors'' reactions to them.
Why Did Solid Earnings Get a Poor Reaction? Figure 1:Sundial Stock
Sundial is a game changer.
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Decent Q4 Earnings, but...
Sundial, a Canadian cannabis firm, reported $17.7 million in net earnings in the fourth quarter, which was up 63 percent from the previous year. However, the company closed the year with a net profit of $56.1 million, which represented a drop of 8% YoY.
The company''s losses are steepening, not reducing to profitability, due to sundial''s net losses for 2021. However, when we zoom out to the full-year scale, we get a less rosy picture. Sundial''s net losses accounted for $178.85 million for 2021, but just $160.2 million for 2020''s losses.
According to Sundial, the increase in net losses in 2021 was primarily caused by unrealized losses on marketable securities, mainly due to fluctuation in the share price within the cannabis-related investment portfolio.
Sundial''s stock has been adjusted for a record amount of $24.9 million, which compared to a $19.8 million EBITDA loss in the previous year. This is especially important given the $850 million in Sundial''s stock, which is quite over half a billion. And, because Sundial has no outstanding debt, the company has the resources it needs to pursue its strategic growth plans.
...A Poor Market Reaction
At first glance, the fourth-quarter results for SNDL were satisfactory. However, the stock decreased just over 6% in the trading session following the results release; then the SNDL decreased another 7% the following day. The markets'' negative reaction may be explained by a few factors.
First, it was reported that marijuana sales in the United States fell in YoY for the first month of 2022. For the time being, it appears that eliminating epidemic restrictions is putting a damper on marijuana purchases.
Sundial''s IPO was scheduled to begin in the first quarter of 2022, but a date has not been confirmed.
Sundial will have to conduct a reverse stock split, but it will not meet Nasdaq compliance guidelines. Sundial must trade more than $1 per share for ten consecutive trading days to avoid the possibility of delisting from the tech-heavy American stock exchange.
Unfortunately, in the last 180 days, SNDL stocks haven''t reached $1 even once. In mid-November, the stock reached 92 cents, and in March of this year, thanks to news on changes in cannabis legalization, shares reached 81 cents. However, Sundial stocks have been hovering around half a dollar for several weeks now.
Sundial has been given another 180 days to try and get a $1 per share recently, after again failing to meet the Nasdaq deadline.
Thanks to retail investors, there is no longer longer playing defense.
Sundial''s business has exhibited a new dynamism of late. A letter from Sundial Growers CEO has been issued to the company''s shareholders, which has uncovered the future of Sundials.
Sundial was founded after a "broken" IPO, where the company encountered several external and external challenges, such as excessive leverage and inadequate cost control. This situation required a restructuring plan.
Sundial became considered a meme stock in 2021, with only three billion shares traded in the first quarter of 2021. Retail assistance helped Sundial increase CAD$1.2 billion between 2020 and mid-2021, and that support was crucial to rebuilding the company''s business.
According to George, the meme trading phenomenon was largely driven by a variety of factors, including stimulus-funded pandemic spending and commission-free platforms such as Robinhood. Despite the CEO''s successful restructuring, he criticized the broker for its payment per order flow, which he believes "encourages] uninitiated retail investors."
Sundial''s future will be based on two key principles, according to George. The company went from flirting with bankruptcy to opening up new pipeline opportunities. Today, Sundial doesn''t have to continue playing in defensive mode.
(1) Core business cannabis operations: much work has been put into place to improve efficiency and cultivation quality. Sundial has "flower quality [that stacks up against any competitor."
Sundial''s investment portfolio includes SunStream Bancorp''s joint venture, through which cannabis businesses will be given lending opportunities, which will result in cash flows that, as George so well declares, will be "mother''s milk" for the whole business.
What are some of you concerned about Sundial''s performance lately?
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. A portion of the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for your support for Wall Street Memes