Reddit’s favorite weed stock SNDL posts staggering revenue growth, but Cantor lowers price target

SNDL Inc. SNDL released its financial and operating results for the second quarter ended June 30, 2022 on Monday, revealing record net income of C$223.7 million ($173.3 million)compared to C$9.2 million in the second quarter of 2021, representing an increase of 2,344%.

Net loss was C$74.0 million for the second quarter of 2022, compared to a net loss of C$52.3 million in the second quarter of 2021, an increase of 41%.

Loss of adjusted EBITDA of C$25.9 million for the second quarter of 2022, including an adjusted EBITDA loss of CA$35.5 million from the investment segment, compared to an adjusted EBITDA loss of CA$0.2 million in the second quarter of 2021.

The analyst

Cantor Fitzgerald’s Pablo Zuanic retained the ‘Neutral’ rating on SNDL shares, lowering the price target to $3.56 from $4.80.

The thesis

Zuanic reduced the price target due to declining market valuations.

Like other marijuana companies, with over $1 billion in cash flow, Sundial also uses funds to build an “ecosystem.”

However, unlike Tilray TLRY who bought low-multiple, EBITDA-positive, cash-generating consumer packaged goods companies, or Canopy Growth GCCwhich chose to invest in US nationality through stakes in US multi-state carriers and brands, “Sundial chose to diversify into four distinct verticals which, at first glance, appear less synergistic and have resulted in a higher than average level of complexity (vs. the group), in our opinion,” Zuanic said.

Still, even though SNDL doesn’t have many international options and is more focused on Canada, its credit portfolio could offer a route into the US market, the analyst noted.

“A revaluation of the cannabis asset market and/or the company finding ways to monetize the various coins (or create value via earnings growth in each unit), could drive upside, but we remain neutral and prefer to focus on more direct ways to play the industry,” Zuanic said.

“Our reduced estimates reflect more challenging dynamics across most segments of the cannabis industry,” the analyst concluded.

price action

SNDL shares were trading up 2.21% at $3.24 per share in Tuesday’s pre-market session.

Benzinga Cannabis Capital Conference

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Photo: Courtesy of Diyahna Lewis on Unsplash