Over the last decade, the global cannabis industry has expanded to become a growing global market, generating over $37 billion in sales in 2021. It is expected that the market will generate $100 billion in sales by 2026, reflecting a bullish trajectory for the industry.

The Canadian legal cannabis sales have been boosted by an increase in the number of stores and falling flower prices that have brought consumers out of the illicit market for the product. The December retail sales of cannabis across the country rose 8.5% from the prior month to CAD382.40 million ($298.61 million). Moreover, according to a Deloitte Canada report, since Canada legalized recreational cannabis in 2018, the industry has contributed $43.5 billion to the country’s GDP. 

Amid this, Canadian cannabis stocks Sundial Growers Inc. (SNDL) and Flora Growth Corp. (FLGC) have gained more than 8% this month. Which is surprising, given that the S&P 500 is up only 1% in the same time frame.

Sundial Growers Inc. (SNDL)

SNDL produces and markets cannabis products to the adult-use market in Canada. The company distributes inhalable products such as flowers, pre-rolls, and vapes. The company is headquartered in Calgary, Canada.

On November 11, SNDL announced its share repurchase program to repurchase CAD100 million ($78.09 million) of its outstanding common shares. The time-to-time share repurchase is expected to return value to shareholders.

In October, the company entered into an arrangement agreement with Alcanna Inc., a North American private sector retailer of alcohol, to acquire all of the outstanding common shares of the firm for a total consideration of approximately $346 million. The acquisition is expected to improve its cash flow and marks its expansion into the liquor industry. On January 6, SNDL announced that it has agreed to improve the consideration to be provided for Alcanna shareholders to 8.85 shares of SNDL and $1.50 in cash consideration.

For the fiscal third quarter ended September 30, SNDL’s net revenue increased 11.7% year-over-year to CAD14.37 million ($11.22 million). Net income from continuing operations came in at CAD11.31 million ($8.83 million), while net income per common share, attributable to SNDL, stood at CAD0.005, both up substantially from their negative year-ago values.

The consensus EPS estimate for the quarter ending June 2022 indicates a 52.7% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $14.52 million reflects a rise of 98.6% from the prior-year quarter.

SNDL’s stock gained 8.7% over the past month and is currently trading at $0.53.

Flora Growth Corp. (FLGC)

FLGC, headquartered in Toronto, Canada, is a cannabis company that engages in the cultivation, processing, and supply of cannabis products to pharmacies, medical clinics, and cosmetic companies globally. The company’s offerings include medicinal-grade cannabis oil, cannabis oil extracts, and related products.

On February 22, FLGC announced that it had filed 23 cannabinoid-infused food and beverage products with the Instituto Nacional de Vigilancia de Medicamentos y Alimentos (INVIMA), a Columbian regulatory authority. The company expects to obtain approvals for its cannabinoid-infused food and beverage products, including juices, sparkling seltzers, gummies, and healthy snack foods and should boost its product portfolio.

On February 16, FLGC announced that it had signed an agreement with Artos Ltd. for selling approximately 3,600 kg of dried high-THC cannabis flower to Israel from its Cosechemos cultivation facility. This should bolster the company’s position in international cannabis markets.

For the six months ended June 30, FLGC’s net cash flows from financing activities increased 40.9% year-over-year to 14.42 million, while the company’s cash balance stood at $18.81 million, registering an increase of 181.1% from the prior-year period.

Street EPS estimate of $0.03 for fiscal 2022 reflects an improvement of 121.4% from the prior year. Likewise, Street revenue estimate for the same year of $41.10 million indicates a 287.7% year-over-year increase.

The stock has gained 2.25% year-to-date and 16.6% over the past month.

SNDL shares were trading at $0.52 per share on Friday afternoon, down $0.00 (+0.73%). Year-to-date, SNDL has declined -10.08%, versus a -7.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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