Sundial Growers (NASDAQ: SNDL) produces and markets cannabis in Canada, focusing on premium brands, specifically inhalables. The company went public in 2019 and recently restructured its organization. It gained meme stock status after gaining investors’ attention on Reddit, and at one point in 2021, the stock was up over 400% before dropping significantly.
Today though, we’re taking a look at three of Sundial’s competitors in a saturated market set to experience tremendous growth.
Tilray (NASDAQ: TLRY) is the largest cannabis company by revenue after the completion of its merger with Aphria Inc. Tilray was founded in 2013 and has primarily been focused on medicinal cannabis, with the newly merged company maintaining the Tilray name, but Aphria’s CEO..
Tilray operates in North America and exports internationally as well in places such as Australia and Latin America. In addition, it has a base in Portugal from which it can export to the European market. Therefore, positive global legalization trends in the cannabis and hemp space should benefit Tilray as it actively seeks to expand its footprint.
Tilray and Aphria are yet to report earnings as a combined entity and may face challenges due to the integration of the merger. However, it is forecasting $100 million in synergies in the next 18 months. This merger will leave the ‘new’ Tilray with the “lowest cost of production” and with more established brands should create shareholder value.
2. Canopy Growth
Canopy Growth (NASDAQ: CGC) was one of the first publicly traded Canadian cannabis company’s and was founded in 2013.
The company produces a wide range of products under various brand names, including edibles, vapes, and beverages. One of its largest shareholders is the alcoholic beverage company Constellation Brands. It is a market leader in a number of the products it produces in Canada and Germany but lagging in the U.S., which it views as a critical area for growth and will enter once it becomes federally legal.
In Q4 2021, net revenue increased by 37% YoY to $138.4 million, driven by CBD and vape sales in the U.S. However, its gross margin decreased 9% in fiscal 2021 due to lower production and an unfavorable product mix. However, management stated that it is on track to be profitable in the second half of 2022 despite posting a net loss in the quarter and full fiscal year.
Similar to other competitors, Canopy Growth has continued to expand by growth through acquisition, severely impacting the balance sheet. It has gone from having a large cash pile of $3 billion to $1.5 billion in cash and cash equivalents in Q4, with debt tripling year-over-year (YoY) to $1.5 billion. This capital allocation, along with its rich valuation at nearly 16x price to sales, may cause investors to think twice before investing.
OrganiGram Holdings (NASDAQ: OGI) is similar to Sundial as it is a small-cap cannabis company founded in 2010 and operates in all 10 of the Canadian provinces.
OrganiGram has some of the fastest-growing marijuana brands in Canada, with SHRED being the most searched product on the Ontario Cannabis Store. It continues to decrease costs as the company scales, and management believes that it is gaining increased brand recognition, allowing for higher prices and margins.
OrganiGram reported strong fiscal Q3 2021 results with revenue increasing by 31% YoY driven by recreational marijuana sales, and its net loss decreased significantly to $4 million. Management stated that there is a positive outlook for the industry with sales trending higher due to stores re-opening and believes that its latest quarter was an “inflection point” after a tough Q2. The company’s balance sheet is also robust, with very little debt and cash and short-term investments of $222 million.
Notably, the company continues to innovate and has a wholly-owned subsidiary for edibles. It has launched 84 products in the past year, with a further 20 expected by the end of Q4 as part of its brand revitalization strategy.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
Colm's favorite stock is Virgin Galactic as it is representative of his visions for our world in the future.