Canadian cannabis producer Sundial Growers (NASDAQ:SNDL) stock has been on a decline in the last six months. The 29% dip is only a little better than benchmark Horizons Marijuana Life Sciences ETF’s 32% loss.
Uncertainties in business make it risky for investors. The company is transitioning and hence it’s hard to evaluate if it’s a worthwhile investment.
The company had a bad quarter one and will need significant improvement in the coming quarter for wooing investors. Having undergone a number of changes, it is hard to assess on its EBITDA profit in the last quarter was the new normal.
The company has been on an acquisition spree during the year giving hope to its investors and now has become a leading retail cannabis company in Canada. It had acquired Inner Spirit, which owns the Spiritleaf brand, having 86 retail cannabis stores across the country and is aiming to reach 100 by the summer. Additionally, the company had done investment in Indiva, an edible cannabis company.
Investors need to be aware that the acquisitions are contributing to its margins going down or helping the company be out of the danger zone.
In May, the firm had confirmed an unrestricted cash balance of 752.7 million Canadian dollars.
However, its net sales of CA$9.9 million were down 29% from the previous period while its gross margins were negative. The firm’s performance wasn’t impressive during 2020 with net revenue of CA$60.9 million, down by 4% from the previous year and gross margin was CA$9.2 million, or 15% of its top line.