As long as pot stocks have been around, there has been some sort of excitement around cannabis companies and their predicted growth. But this year was a bit different, with the Reddit-fueled stock frenzy in January, Sundial (NASDAQ: SNDL) found itself lifted out of penny stock territory for a short, but sweet period of time. 

Now, however, with its stock hovering around the $0.85 mark -- as of July 12 -- it leads us to ask if Sundial is a company worth investing in right now?  

The bull case for Sundial Growers

Sundial stock does not look too pretty at the moment as the market correction has impacted all but a few public companies. However, the Reddit-induced rise in Sundial's stock valuation back in early February gave the company an opportunity which they did not squander. By issuing 1.3 billion new shares, it sold so many that it has now paid off all outstanding debt as well as build up a substantial cash pile. 

Now, Sundial is turning its sights on financing the marijuana industry rather than just producing pot products. Earlier this year Sundial and the alternative assets management group, SAF, announced that they will be forming a joint venture. The two companies will partner up to invest in the wider marijuana industry through the formation of SunStream Bancorp. So far, Sundial has committed $154 million to the venture, showing that it is indeed flush with cash at the moment. Sundial had cash, cash equivalents, and marketable securities of around US$723 million as of March 31, 2021.

In its Q1 report, Sundial had some bad areas, but it also had some positive ones too. For example, this Canadian weed company posted its first-ever positive adjusted EBITDA at CA$3.3 million ($2.7 million), compared to a loss of CA$5.6 million ($4.6 million) the previous quarter. 

Overall, the company is in a transition period whereby it is scaling back its unprofitable products and focusing on new ventures that will hopefully encourage investors to view SNDL stock as a venture capital fund for cannabis companies as well as a traditional marijuana cultivator.

The bear case for Sundial Growers

Despite the positive bull case, there is no escaping the fact that Sundial is a beleaguered company in a young, volatile market. Many of its products are not profitable and as such the company is scaling back discount products, choosing to focus on premium inhalants instead.

Whilst many Canadian weed companies are looking to benefit from the progression of marijuana legalization in the U.S., unfortunately, Sundial will not. The company operates primarily in the Canadian market, as such it will not see its sales increase as a result of U.S. rules relaxation surrounding the much-loved herb. 

As for its financials, the company is in transition, as is evidenced by its recent venture into the cannabis equity fund market. However, its revenue is falling year-over-year and its losses continue. Although it posted a positive EBITDA, it also posted a bad gross margin, coming in at negative CA$1.6 million ($1.3 million). 

Finally, this stock came close to being delisted in the last year, only the Reddit-fueled stock price increase prevented that from happening. Unless it can get back out of the penny stock zone, there is a chance that it could still be delisted in the future. 

So, should I invest in Sundial? 

This company is at a turning point, which could either pan out very well, boosting the company's profits and future outlook, or it could be the last attempt to bring some momentum to Sundial's lackluster performance over the past few years. 

If you are risk-averse, then this is not the company for you. However, if you like a risk every now and then, especially one as discounted as Sundial is right now, then this could be a stock to hold onto for the next few years to see where it goes.

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Quickfire round: 

• What do Sundial Growers do? 

Sundial Growers Inc. is essentially a pharmaceutical company that produces and grows a range of cannabis strains. It also produces and sells different cannabis and cannabinoid products.

• Where is Sundial located? 

Sundial Growers Inc. is based in Canada. Its headquarters are in Calgary. 

• Who is the CEO of Sundial Growers? 

The CEO is Zachary George who was appointed on the 30th June 2020 after Torsten Kuenzlen resigned.

MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.