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Why Sundial Growers and Tilray Are Flying High This Week

By Eric Volkman - Jun 4, 2021 at 3:42PM

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The bigger the better, it seems, in the marijuana business.

What happened

Canadian marijuana stocks Sundial Growers (SNDL 11.07%) and Tilray (TLRY 10.26%) have been serious investor favorites this week. The former was up by 23% just a few hours short of Friday's market close, while the latter had advanced by 13%.

Both are getting lifts from everyone's favorite stock market driver these days, Reddit group WallStreetBets, but I think there's more to the story than that.

Marijuana bud with Canadian flag in the background.

Image source: Getty Images.

So what

The marijuana industry is consolidating, and Sundial and Tilray are two of the leading consolidators. Just this week, a spate of deals was announced. These include Green Thumb's acquisition of Massachusetts medical cannabis specialist Liberty Compassion for an undisclosed amount and Harborside's nearly $44 million purchase of Sublime, a fairly well-known brand in the retail pot world.

These were relatively small-scale deals. But they illustrate an important point: Size and scope count in this business.

We're currently witnessing a kind of arms race, a move to scoop up assets in order to build economies of scale and broaden market reach. This is enhancing the popularity of Sundial and Tilray, both of which have fattened up recently through acquisitions.

Now what

Of the two bull runs, Tilray's looks to be the more sustainable. Combined with the former Aphria, the company is now strong across numerous promising segments. Sundial is in the midst of transitioning from a wholesale company to a retailer and brand operator, but it hasn't yet proven it can make the new business model work.

 

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Green Thumb Industries. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Sundial Growers Inc. Stock Quote
Sundial Growers Inc.
SNDL
$2.81 (11.07%) $0.28
Green Thumb Industries Stock Quote
Green Thumb Industries
GTBIF
$10.10 (1.00%) $0.10
Harborside Inc. Stock Quote
Harborside Inc.
HBOR
Tilray Stock Quote
Tilray
TLRY
$4.30 (10.26%) $0.40

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

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