Happy Friday! Given the continuing strength in the markets, investors would probably prefer to continue trading rather than take a two day break. A poor jobs report has done little to deter the bullish sentiment as participants would prefer to focus on a potential stimulus bill than the economic data point. Retail Investors have been busy on the research front as there is some semblance of a ‘Fear of Missing Out’ rally following a record setting November.
- Trivia Question- What was the first cannabis stock to be listed on the Nasdaq?
Your clients have been following a wide swath of names. The usual suspects remain at the top of their list with electric vehicle players: Tesla, Nio, Nikola and Workhorse still in focus. COVID-19 plays Moderna and Pfizer have also captured attention. Today, we wanted to provide some color on a cannabis name that landed at the top of your client’s searches.
TrackStarIQ Data
Here are some highlights from Retail searches this week –
| Rank | TOP STOCKS – BY Retail (Total Traffic) This Past Week | Ticker | TOP STOCKS- BY RETAIL (Surge* Traffic) This Past Week | Ticker | TOP ETFs By RETAIL (Total Traffic) This Past Week |
|---|---|---|---|---|---|
| 1 | Sundial Growers Inc | SNDL | Nesco Holdings Inc | NSCO | SPDR S&P 500 ETF |
| 2 | Nio Inc | NIO | Espey Mfg & Electronics Corp | ESP | Invesco QQQ |
| 3 | Tesla Inc | TSLA | Lizhi Inc ADR | LIZI | SPDR Gold Trust |
| 4 | Apple Inc | AAPL | Ever Glory Intl Group | EVK | ProShares Ultra VIX Short-Term Futures |
| 5 | Moderna Inc | MRNA | Rolls Royce Holdings plc | RYCEY | iShares Silver Trust |
| 6 | Salesforce.com Inc | CRM | Merrimack Pharmaceuticals Inc | MACK | ARK Innovation ETF |
| 7 | Zoom Video Communications Cl A | ZM | Kingsway Financial Services | KFS | Consumer Discretionary Select Sector SPDR Fund |
| 8 | Nikola Corp | NKLA | Waddell & Reed Financial | WDR | VanEck Vectors Gold Miners ETF |
| 9 | Blackberry Ltd | BB | Nanovibronix Inc | NAOV | Technology Select Sector SPDR Fund |
| 10 | Workhorse Grp | WKHS | Reflect Scientific, Inc. | RSCF | ProShares UltraPro QQQ |
| 11 | Pfizer Inc | PFE | Aehr Test Systems | AEHR | Energy Select Sector SPDR Fund |
| 12 | Ideanomics Inc | IDEX | Sequential Brands | SQBG | iShares Russell 2000 ETF |
| 13 | Alibaba Group Holding | BABA | Patterson Companies | PDCO | ProShares UltraPro Short QQQ |
| 14 | Eversource Energy | ES | Viveve Medical | VIVE | VanEck Vectors Semiconductor ETF |
| 15 | Adv Micro Devices | AMD | Regen Biopharma, Inc. | RGBP | iPath Series B S&P 500 VIX Short-Term Futures ETN |
| 16 | Fuelcell Energy Inc | FCEL | Obalon Therapeutics Inc | OBLN | ARK Web x.0 ETF |
| 17 | Auris Medical | EARS | Social Life Network, Inc. | WDLF | Invesco Solar ETF |
| 18 | Aurora Cannabis Inc | ACB | Splunk Inc | SPLK | ETFMG Alternative Harvest ETF |
| 19 | Boeing Company | BA | Catabasis Pharma | CATB | Direxion Daily Small Cap Bull 3X Shares |
| 20 | Gamestop Corp | GME | Enlivex Therapeutics Ltd | ENLV | iShares 20+ Year Treasury Bond ETF |
*- Surge data is based on the average traffic from the past two days compared to the average traffic from the previous market week.
Sundial (SNDL) is a Canadian cannabis play that was the top searched ticker by retail investors. Formed in 2006, the company operates out of Calgary, Canada. It offers adult-use cannabis products under its Top Leaf, Sundial, Palmetto and Grassland brands. Readers of our Wall Street Connected newsletter may recognize the name as it came in at #2 in surge research by Financial Advisors with AUM >$1 bln. When we see FAs managing billions and retail clients both searching a name, then that is going to warrant a closer look.
Shares of SNDL quadrupled back in November following election results which saw marijuana referendums pass across the board. On November 23, SNDL posted Q3 results and investors were excited to see the company reduce debt levels by CAD$23 bln. SNDL was able to reduce costs which reflects an improvement in operations as the company continues to transition from a wholesale marijuana business to higher-margin branded retail sales. Before we get too excited, we would note that revenues fell 36% quarter over quarter, well short of expectations. Sundial also lost CAD$71 mln in the quarter.
Some of the debt reduction comes at the expense of shareholder dilution as the company has converted debt into equity, thus the 427 mln float. Today, the company announced a $200 mln mixed shelf offering as well as a preliminary prospectus supplement for a new at-the-market equity program for up to $150 mln in common equity. There are also worries about the company doing a reverse split in order to avoid delisting from the Nasdaq. Investors need to understand this debt dilution risks if getting involved.
Still, there is plenty of interest around the name. The market cap stands at approximately $250 mln which puts it at a Price-to-Sales of approximately 5x, hardly expensive in today’s market. It has gone through a transition of its management team which could help ease concerns. CEO Zach George said at a conference last month that it was well-funded through 2021 which, on the surface, suggests dilutive actions are coming to a close. Of course, today’s shelf registration may raise some eyebrows.
Shares of SNDL traded as high as $3.88 in January but slumped to $0.14 on November 2. Since then they have rallied 450% post-elections. There has been a pick up in volume and the stock has been able to hold above its 200-moving average for the past week. Momentum is certainly behind the stock but we would suggest following your clients lead and do some homework before putting capital to work in SNDL.
Trivia Answer- Cronos (CRON) was the first marijuana stock to be listed when it received approval by the Securities and Exchange Commission on February 27, 2018.