Sundial Growers Inc. (NASDAQ:SNDL) has already lost more than 60% of its value in 2020. Several leadership changes, including the resignation of its CEO who will "pursue other interest," have sent the stock into a tailspin in recent weeks.
And despite the company's focus on "efficiency improvements and cost-cutting initiatives," investors aren't excited about its prospects. With cash flow a concern for many in the industry, investors may be interpreting the cost-cutting measures to mean that cash is tight, especially after the company also announced it would be cutting 10% of its workforce.
While profitability is the goal, cash flow is paramount to keeping day-to-day activities going. Sundial burned through more than CA$28 million in cash from its operating activities in its most recent quarter and its free cash flow was negative CA$77 million.
Finding a way to cut expenditures while still growing is a challenge that many in the industry are facing today. The challenge is that with share prices continuing to fall, it's not as easy as just issuing more shares to raise cash as dilution will send a stock down even quicker, compounding the problem even further.
If Sundial can make strides toward improving its financials, it can hopefully win back some investors.
With a market cap of around $125 million, the stock is still a modest size given some of the larger valuations in the industry and so there could be a lot of potential for the stock to achieve significant returns for investors if it can recover.
However, unless Sundial can prove that's a better buy than other marijuana stocks that have fallen over the past several months, it's still going to be an uphill battle in getting investors on board.
