Please ensure Javascript is enabled for purposes of website accessibility

How Sundial Growers Trounced Aurora Cannabis in Their Latest Earnings Updates

By Keith Speights - May 18, 2021 at 6:01AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Sundial delivered on what Aurora has been promising.

Aurora Cannabis (ACB -1.32%) has ranked among the most widely followed pot stocks for years. However, there's a rising star that has largely eclipsed Aurora this year -- Sundial Growers (SNDL -2.84%). Thanks in large part to the Reddit community, Sundial jumped into the center of attention for marijuana-focused investors several months ago.

However, Sundial isn't just beating Aurora when it comes to grabbing the spotlight these days. Here's how Sundial trounced Aurora in their latest earnings updates.

A gloved hand holding a cannabis leaf in front of a Canadian flag.

Image source: Getty Images.

Sundial's surprise

Aurora Cannabis has promised for a long time that it's on a solid path to generate positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). This promise still hasn't been met. The company reported an adjusted EBITDA loss of 24 million in Canadian dollars in its quarterly update last week.

CFO Glen Ibbott stated in Aurora's fiscal 2021 third-quarter conference call that the company is "confident" that it will achieve a positive EBITDA run rate within the next 18 months. You couldn't blame investors for being skeptical after the company's past performance of overpromising and underdelivering.

Meanwhile, Sundial Growers showed that it was more action than talk with its first-quarter results reported earlier this month. The Canadian cannabis producer gave investors a pleasant surprise, posting positive adjusted EBITDA for the first time ever of CA$3.3 million. 

Sure, Sundial's feat was made possible primarily by its investment gains and income from cannabis investments. However, there's an old saying: "Don't look a gift horse in the mouth." The bottom line is that Sundial delivered on what Aurora has only been promising.

Bleakness on both sides

There was a lot to dislike, though, about both companies' quarterly updates. Aside from a few bright spots, the results looked bleak for both Aurora and Sundial.

Of especially serious concern, Aurora and Sundial reported declining revenue. Aurora's revenue fell 25% year over year to CA$55.2 million. Sundial's gross revenue slid 29% year over year to CA$11.7 million.

The Canadian adult-use marijuana market continues to present major headwinds for all companies. The COVID-19 pandemic hurt retail sales. At the same time, provinces reduced their inventory levels.

Both cannabis producers also posted huge losses in their latest quarters. Aurora announced a net loss from continuing operations of CA$165.7 million, compared to a loss of CA$133.5 million in the prior-year period. Sundial's net loss from continuing operations totaled CA$134.4 million in Q1. In the prior-year period, Sundial reported a net loss of CA$37.9 million.

Similar paths

Aurora and Sundial are on strikingly similar paths. Both companies have made significant spending cuts and continue to focus on operational improvement. Aurora plans to slash between CA$60 million and CA$80 million in annual costs over the next 18 months.

Both companies are also focused on investing further in cannabis opportunities. As mentioned earlier, Sundial's positive adjusted EBITDA was due mainly to its investments. Aurora appears to be preparing to invest more as well. CEO Miguel Martin specifically alluded to "opportunistic M&A [mergers and acquisitions], particularly in the U.S." The company plans to file a prospectus for a $300 million stock offering that could be used to fund acquisitions.

Neither pot stock looks attractive, in my view, with their continued losses and revenue declines. However, Sundial appears to at least be moving in the right direction. It's a different story for Aurora.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

SNDL Inc. Stock Quote
SNDL Inc.
SNDL
$3.08 (-2.84%) $0.09
Aurora Cannabis Stock Quote
Aurora Cannabis
ACB
$1.86 (-1.32%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
403%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.