Sundial vs. Tilray: Which Popular Cannabis Stock Is a Better Buy?

: SNDL | Sundial Growers Inc. News, Ratings, and Charts

SNDL – Popular cannabis stocks, Sundial (SNDL) and Tilray (TLRY), have significantly underperformed the markets in the last three years. However, investors that are optimistic that U.S. federal legalization is on the horizon, may want to look at buying the dip. Today I’ll analyze and compare these two stocks to determine which is currently the better buy.

Investors with exposure to cannabis companies have endured another year of negative gains in 2021. Most Canadian cannabis manufacturers have been grappling with massive losses, high inventory levels, million-dollar write-downs, a thriving black market, and shareholder dilution. 

However, optimists believe the U.S. will legalize cannabis in the not-too-distant future, with Senate Majority Leader Chuck Schumer working on reform efforts.  Legalization would not only benefit American companies but cannabis companies from around the world, as the U.S. is by far the largest marijuana market on the planet.

That’s why contrarian investors might want to consider scooping up shares of cannabis stocks that have been hard hit in the past few years.  Today I’ll analyze and compare Sundial (SNDL), which is trading 96% below record highs set in 2019 and Tilray (TLRY), down 83% from all-time highs set in 2019.

Sundial 

In 2020 Sundial reported sales of $60.9 million which were significantly lower compared to sales of $75.9 million in 2019. The decline in top-line is expected to continue as analysts expect sales to range around $49 million in 2021. In Q3 of 2021, Sundial reported revenue of $14.36 million, an increase of over 15% compared to year-ago sales that stood at $12.86 million.

Last year, Sundial explained it will focus on the sale of high-margin cannabis products to improve its profit margins. It also entered the cannabis financing business to provide debt as well as equity capital to pot producers. While Sundial is diversifying its revenue base, it reported negative investment sales of $4.8 million which show it has reported unrealized losses in this vertical.

Further, Sundial has diluted shareholder wealth at a rapid pace over the last two years. In fact, the total number of outstanding SNDL shares has surpassed two billion, up from just 105 million at the end of Q2 of 2020. In its most recent quarter, Sundial reported an operating loss of $18.8 million. 

But, the constant capital raise allowed Sundial to ensure its balance sheet is debt-free and provide it with the flexibility to make big-ticket investments in the cannabis sector. Sundial’s cash balance stood at $753 million at the end of Q3.

Tilray

Valued at a market cap of $3 billion, Tilray aims to generate $4 billion in sales each year by 2024. In its fiscal fourth quarter of 2021 that ended in August, Tilray reported sales of $168 million, indicating an annual rate of $672 million. 

The company’s optimistic forecast is based on the assumption that the U.S. will legalize marijuana at the federal level allowing Tilray and peers to begin operations in a much larger market as well as consider acquisitions that will be accretive to revenue and profit margins.

Last year Tilray completed the acquisition of Aphria making the combined entity the largest cannabis player in Canada while providing it with access to the medical marijuana market in Europe.

Tilray also acquired MedMen’s convertible debt which might even clear the path for a full-fledged acquisition once pot is legalized in the U.S. The marijuana market in the U.S. is worth $80 billion, providing players with significant room to expand its top-line.

The bottom line

With no set timeline for U.S. legalization, both two stocks discussed here are high-risk bets.  However, I believe Tilray is currently the better investment.  That’s because not only is it the largest Canadian cannabis company, it also has set itself up to quickly take advantage of the American marijuana market when legalization occurs.


SNDL shares were trading at $0.59 per share on Friday morning, up $0.01 (+0.86%). Year-to-date, SNDL has gained 2.02%, versus a -1.67% rise in the benchmark S&P 500 index during the same period.


About the Author: Aditya Raghunath


Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SNDLGet RatingGet RatingGet Rating
TLRYGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Is the Bear Market Here?

We are witnessing the nastiest stock market (SPY) correction since Covid first came on the scene. That has some pondering if the next bear market is upon us. 40 year veteran investor Steve Reitmeister gives his clear eyed view on the market outlook and trading plan in this timely commentary. Get the full story below...

:  |  News, Ratings, and Charts

Looking for Value in the Tech Sector? Check Out These 4 Stocks

Tech stocks stumbled in the first trading week of this year over investors’ concerns about the looming interest rate hikes. Although a rising interest-rate environment does not bode well for technology companies, experts believe high demand for tech solutions will more than offset the negatives. So, we think it could be wise to bet on undervalued tech stocks International Business Machines (IBM), HP (HPQ), NortonLifeLock (NLOK), and Cirrus Logic (CRUS). Read on for more details.

:  |  News, Ratings, and Charts

3 Reasons to LOVE Stocks Under $10

The stock market can be a brutal place. Far too often, today’s winners will turn into tomorrow’s losers. Just think of all the excitement generated by stocks like Peleton, Zoom, and Teladoc. These stocks soared higher in 2020 and the early parts of 2021 only to crumble in recent months, punishing those who were greedy and overstayed their welcome. But, the opposite is also true. Read on below to find out more...

:  |  News, Ratings, and Charts

SoFi vs. Affirm: Which Fintech Stock is a Better Buy?

Today I will analyze and compare SoFi Technologies, Inc. (SOFI) and Affirm Holdings, Inc. (AFRM) to determine which fintech stock is a better buy,

:  |  News, Ratings, and Charts

3 Reasons to LOVE Stocks Under $10

The stock market can be a brutal place. Far too often, today’s winners will turn into tomorrow’s losers. Just think of all the excitement generated by stocks like Peleton, Zoom, and Teladoc. These stocks soared higher in 2020 and the early parts of 2021 only to crumble in recent months, punishing those who were greedy and overstayed their welcome. But, the opposite is also true. Read on below to find out more...

Read More Stories

More Sundial Growers Inc. (SNDL) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SNDL News