Sundial Growers (SNDL 4.22%) has been a meme-stock favorite this year, and that's not necessarily a bad thing. The stock is up more than 40% year to date. The Canadian cannabis company has lost money since its initial public offering in 2019, but could now be turning things around with nine months of positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
The company paid off its long-term debt at the end of last year, and in the third quarter, posted positive adjusted EBITDA of 10.5 million Canadian dollars ($8.26 million), up from CA$4.4 million in the same quarter a year ago. Sundial also reported positive net income of CA$11.3 million in the third quarter.
The company said it had net revenue from cannabis segments of CA$14.4 million in the quarter, up 57% sequentially and 12% year over year. Its cash position, long a problem because of the company's burn rate, is in a better place now with CA$571 million at the start of November, up from only CA$60.3 million on Dec. 31, 2020.
I'm not saying there isn't plenty of risk with this cannabis stock. It has been trading under $1 a share since June, putting the company in danger of being delisted by Nasdaq. On top of that, it still has to prove that its improved third-quarter numbers aren't an aberration.
The company is betting that its CA$346 million October purchase of Canadian liquor retail company Alcanna and Nova Cannabis will help with its cash flow, in addition to making the company's revenue streams more diverse. Alcanna, with its 171 stores, produced CA$16.4 million of free cash flow over the past year, and its business could be used in the future to help promote the company's cannabis business as well.
Nova came as part of the deal. Its 71 retail outlets, combined with Sundial's purchase in June of Inner Spirit Holdings, gives Sundial a total of 181 retail outlets in Canada, making it the largest multiprovince operator in the country.
The company also recently announced a stock buyback, which may help make up for its recent history of stock dilution. As a long-term play, its hard not to see Sundial's potential, despite current struggles.
