SNDL Stock: Why Cannabis Play Sundial Is Soaring Today

Things are looking quite green for Sundial Growers (NASDAQ:SNDL) and fans of the up-and-coming cannabis company. In fact, shares of SNDL stock are up almost 30% in intraday trading. So what do investors need to know? And what is behind the impressive move in Sundial?

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To start, investors should be aware that Sundial Growers has been a trendy company in recent weeks. Many fans of the cannabis space have flocked to it thanks to broader support for marijuana use and legalization. And now, an announcement from the company and some speculation has SNDL stock soaring.

So what is that announcement? Well, Sundial Growers announced earlier today that it is now free of debt. Like many cannabis names, Sundial was struggling. The company said that just two quarters after its initial public offering, it was already running out of cash. But as of now, it has paid down 227 million CAD in debt so far this year.

Investors should note that the company has undertaken financial restructuring measures in order to achieve this feat. Sundial said that sold assets, raised capital and completed debt for equity swaps. Now with no debt, it also says it can focus on its products and on pleasing customers. Importantly, investors should also note that the company has 62 million CAD of cash on hand. The company hopes to improve its cash standing through lowering recurring costs. An example of this is its facility prepayment of 71.9 million CAD in recent weeks. As a result of this  move, Sundial says its annual costs should be lower by about 3.6 million CAD.

Other Catalysts Are Boosting SNDL Stock

Clearly, investors are excited that Sundial Growers is now a debt-free business getting ready to focus on strategic growth and other opportunities. But there are also other catalysts supporting SNDL stock.

Broadly, we know that investor interest has largely been returning to the cannabis space. This comes as President-elect Joe Biden promises to decriminalize marijuana once in office. Additionally, a move by the House of Representatives to pass the Marijuana Opportunity Reinvestment and Expungement (MORE) Act has many investors excited. The thinking is that as states pave the way, legalization at the federal level in the United States should soon follow.

Even more importantly, investors are watching as consolidation comes to the space. Last week, we learned that Tilray (NASDAQ:TLRY) and Aphria (NASDAQ:APHA) were merging in an all-stock deal. Now, rumor has it that Canopy Growth (NASDAQ:CGC) and Sundial will do the same. According to reports of the possible merger, the two companies view such as a deal as a way to leverage growth opportunities. It would also follow a broader consolidation trend and give the combined business a larger roots in the cannabis space.

So what should you do here? Keep a close eye on SNDL stock and the potential merger news. If nothing else, it is clear the cannabis space will be appealing in 2021 and beyond.

On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Sarah Smith is a Web Content Producer with InvestorPlace.com.