Canadian marijuana stocks Sundial Growers (NASDAQ:SNDL) and Tilray (NASDAQ:TLRY) 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.
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.
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.