If a forgotten stock has gone parabolic and skyrockets in value, that usually means it has captured the attention of retail investors. Stocks like GameStop and AMC Entertainment are great examples. They soared last year as retail investors bet on those struggling businesses to defy the odds and prove Wall Street wrong.
A couple of other underdogs that are on many retail investors' watchlists include Sundial Growers (SNDL 0.55%) and Wendy's (WEN 0.34%). Although they're both down more than 20% this year, here's why they have the potential to soar.
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1. Sundial Growers
Cannabis producer Sundial Growers hit nearly $4 per share in early 2021. It's down 90% from that high today, struggling to even stay at the $0.40 mark. It's staring down the possibility of having to do a reverse stock split in order to stay listed on the Nasdaq. The only thing that can save it is a sudden surge in its value.
The good news for investors is that there's a possibility it could happen. There are multiple reasons Sundial may go parabolic this year.
The first is that this is a company that's always on the lookout for deals. In the past year, it has closed multiple acquisitions of retail cannabis companies. Prior to that, it wasn't even in the business of operating pot shops. The company also hinted that its recent acquisition of liquor store operator Alcanna wouldn't be its last deal.
Another catalyst that could get investors excited about the business is that, due to acquisitions, Sundial's upcoming quarter will likely be its best ever. It'll be largely due to the Alcanna deal rather than Sundial's own organic growth, and so it's not terribly significant in the grand scheme of things. However, it'll make for a noteworthy accomplishment for the business nonetheless. A sudden jump in revenue, along with a stronger bottom line, could be a recipe that puts Sundial on the radar of many growth investors.
Lastly, there's also the chance that there could be some movement on marijuana reform in the U.S. that may put the industry's growth prospects on display. With fears of a recession looming, there could be an extra incentive for the U.S. government to find any way to boost the economy and add jobs -- legalizing marijuana could provide such an opportunity. It's a long shot, but if there's any kind of hint that legalization could progress, pot stocks as a whole could see a big jump in value. And with Sundial having more than 440 million Canadian dollars in cash on its books as of the end of March, a pathway into the U.S. could encourage it to pursue acquisitions south of the border, further expanding the Canadian-based company's growth opportunities.
2. Wendy's
Fast-food chain Wendy's is another stock that has caught the eye of retail investors in the past. The company has an active Twitter account that often attracts the internet's attention; last year, amid news that Facebook was changing its name to Meta Platforms, Wendy's Twitter account said jokingly that the business would change its name to "Meat." And in an unrelated event, shares of Wendy's surged more than 25% in a single day last year as the stock's popularity soared on Reddit's WallStreetBets forum.
The fast-food chain could do well in a return to normal this year, and that, combined with its strong presence on social media, may lead to some bullishness. But an even bigger catalyst would likely be a potential merger or acquisition. And that's just what its largest shareholder is going to explore.
Last month, hedge fund Trian Partners (it owns more than 19% of Wendy's) said it would be looking for a possible deal that would "enhance shareholder value." The stock jumped on the news, and if a deal comes to fruition, it could set its shares ablaze.
Wendy's has been generating strong numbers of late, with sales of $488.6 million for the period ending April 3, rising by 6.2%. And its profit margin over the trailing 12 months has been a solid 10% of revenue. For growth-oriented investors, the stock may be an attractive investment to hang on to as it expects revenue to climb between 6% to 8% this year. And even more opportunities will be on the way with the company planning to set up hundreds of new locations in the U.K., after a 20-year absence there.
