Cannabis stocks are notoriously volatile investments. In fact, fortunes are regularly being made and lost in the pot market. This volatility gives these equities widespread appeal among traders looking for the next big success story. Sundial Growers (NYSE:SNDL) is one such stock that’s seen several highs and lows in its 19 months since launch.
Sundial shareholders exposed to extreme volatility
In the heated presidential race last year, US Vice President Kamala Harris pledged to decriminalize cannabis, once in office. Thereby helping raise positive market sentiment and further encourage stock pickers to ride the pot stock wave.
In testament to this, Sundial briefly enjoyed a price surge in early December as the US election excitement brought speculative buying power. But that was short lived.
Then last month the Sundial share price hit an exciting high of $3.04 per share, but has since come crashing back down 58% to $1.27. Dreaming of fortunes to be made, this crazy volatility has kept Robinhood traders fully engaged with Sundial.
Insane stock dilution
But it’s not all a bed of roses. Despite the overall optimism in the cannabis space, Sundial itself has endured a lot of bad press. That’s in part due to its insane share dilution path.
When Sundial launched on August 6, 2019, it was to a spectacular reception with its share offering reaching a high of $13. Unfortunately, it’s been downhill ever since. And going by recent headlines it doesn’t appear to be heading back to those dizzy heights anytime soon.
Back in September the company tripled its shares available by issuing more than 1.1 billion more, via a combination of direct share offerings and debt-to-equity swaps. This stock dilution continues compounding the volatility and depressing the future outlook for the company.
And Sundial issued further warrants in February this year to cover previously expiring warrants. This is a vicious cycle that does not bode well for long-term investors. And to top it off, $SNDL has also filed with the SEC to further dilute the shares up to $1 billion if necessary.
Riding the Reddit train
Sundial’s a very popular pot stock among Robinhood traders. In keeping with many other Reddit focussed stocks it’s also extremely volatile. Its February surge was in no doubt fuelled by the Reddit’s r/WallStreetBets crew attempting to pull off another short squeeze.
Sundial is opting to move away from wholesale and into the retail arena. That’s because it promises a higher margin return. But it also means the company needs to rebuild lost revenues. Diluting the stock may temporarily mask this problem but over time the dilution will be clear.
Some shareholders are hoping for exciting acquisitions, but others think it should be concentrating its cash flow on boosting sales of its existing premium products to its Canadian consumers.
This shift to retail is speculative, rife with competition, and will result in disheartening returns for at least the next few quarters. Time will tell whether shareholders can ride out the storm of volatility. Those that hold with conviction will either be handsomely rewarded if management makes good on its promises or they’ll be left sorely out of pocket.
The company is due to report its full year results on March 17 and if anything, that’s adding speculative fuel to the fire. It doesn’t feel like the volatility will be calming down any day soon.
Alternative pot stocks to consider
With so much enthusiasm in the cannabis space it’s remains an interesting place to get invested. A couple of potentially enticing market opportunities could be Creso Pharma (ASX:CPH) and Red White and Bloom Brands (CSE:RWB | OTC:RWBYF).
Creso Pharma excelling in cannabinoid pet health
Creso Pharma is developing, producing and bringing to market medical marijuana products for humans and animals.
Demand for cannabidiol products is growing and Creso is at the forefront of the growing ‘green’ pet market. As owners shower more and more love and expense on their pets, they want them to live longer and enjoy life in optimum health. On discovering the many benefits of cannabidiol products for themselves, pet owners are becoming excited to introduce them to their pets. This is great news for Creso.
The company also recently teamed up with CERES Natural Remedies to distribute Creso’s CBD and hemp animal health anibidiol products in the US. That’s a breakthrough moment and very exciting for shareholders.
Red, White and Bloom strategically positions with growing strength
Red, White and Bloom is another pot stock operating in both the retail and medical cannabis markets. Its strategically positioning throughout the United States, with Florida its latest launch pad. The company has a strong management team giving confidence to shareholders as they operate at their word with integrity and conviction.
It’s just purchased a massive 113,000 square foot processing facility along with the leases to eight stores in prime Florida locations. Red, White and Bloom already has the licences to distribute well-loved cannabis brands including Platinum Vape and High Times. So, it’s landing in a new state with recognised products ready to dispense. This is a fantastic advantage to the rapidly expanding company.