Please ensure Javascript is enabled for purposes of website accessibility

Why Sundial Growers Stock Is Bolting Higher Today

By George Budwell - Jun 1, 2021 at 9:16AM

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's shares are set to continue their recent upward trajectory today.

What happened

Shares of Alberta-based licensed cannabis producer Sundial Growers (SNDL -2.81%) seem poised for a strong start to the week. The pot magnate's shares rose by as much as 14% on heavy volume in pre-market trading Tuesday morning. 

So what

Starting around the middle of last week, Sundial's shares -- along with those of other publicly traded pot stocks -- began heading higher in a hurry. Sundial's stock has so far gained a whopping 28% over just the last five trading sessions.  

Dried cannabis flower laying next to an open jar.

Image source: Getty Images.

Investors have been piling into pot stocks of late in response to the industry's ongoing wave of mergers and acquisitions. The working hypothesis seems to be that this sizable uptick in business development activity should ultimately lead to a more stable, and perhaps more profitable, marketplace down the road.

Sundial, for its part, now appears to well positioned to be one of the few remaining major players in Canada by the end of the decade. And this rosy outlook is probably the main reason investors have been warming up to Sundial's shares over the past few trading sessions.   

Now what

Should cannabis investors take advantage of Sundial's recent upward momentum? While Sundial ought to be in a much stronger position following last month's announcement it would acquire top Canadian retail cannabis player Inner Spirit Holdings, the company's near-term valuation still isn't particularly compelling. In fact, the pot company's stock is presently trading at close to 25 times next year's projected revenue. That's a hefty valuation any way you slice it. So, in short, risk-averse investors may want to pass on this red-hot name for now.

George Budwell 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
$2.77 (-2.81%) $0.08

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

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.