Sundial vs. Tilray: Which Cannabis Stock is a Better Buy?

The cannabis industry is growing quickly. In 2020, the global cannabis market was estimated to be valued at $20.5 billion and it’s expected to reach $90.4 billion by 2026.  However, given the increase in competition and negative profit margins of most marijuana producers, it’s important to identify companies with leadership positions that have the potential to derive outsized gains…

Sundial (SNDL – Get Rating) and Tilray (TLRY – Get Rating) are two Canadian cannabis companies that have been extremely volatile this past year. Let’s see which stock is a better buy right now.

Tilray merged with Aphria

Tilray completed its merger with Aphria in May 2021 creating the largest cannabis company in Canada. While it will be impacted by integration challenges in the near term, the combined entity should be profitable on an adjusted EBITDA basis by the end of 2021.

Tilray will also lead the Canadian retail cannabis market and can take advantage of its existing presence in Europe to gain traction in that region as well. Aphria is the largest medical marijuana distributor in Germany while Tilray has a production facility in Portugal.

Further, Manitoba Harvest that is part of Tilray, is one the largest hemp foods producers in the U.S. Aphria also acquired Sweetwater Brewing which is a craft beer manufacturer, in late 2020. These acquisitions will allow Tilray to leverage its expertise across verticals and enter the U.S. markets at an aggressive pace once cannabis is legalized at the federal level.

In the most recent quarter, Tilray sales fell 8% year over year to $48 million while Aphria’s top-line was up 6% at CA$154 million. Both the companies have not impressed investors based on their financials recently.

Analysts expect Tilray sales to rise from $562 million in 2021 to $861 million in 2022 which means the stock is valued at a forward price to 2022 sales multiple of 9.44x. Wall Street also expects its loss per share to narrow from $1.69 in 2021 to $0.22 in 2022.

Sundial investors have experienced wild swings in 2021

Sundial stock has been part of the Reddit-fueled short squeeze saga making it extremely vulnerable to wild swings in 2021. SNDL stock IPO’ed in August 2019 and touched a record high of $11.5 per share shortly after going public. However, it fell to $0.47 per share by the end of 2020 and was one of the worst-performing Canadian cannabis stocks.

However, the “meme stock” was targeted by the Reddit group of retail traders which sent its shares to $2.1 in February 2021. It’s trading at…

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