Why the stock of sundial producers has skyrocketed today

What happened

Actions of Producers of sundials (NASDAQ: SNDL) surged 28.5% on Tuesday, as investor enthusiasm for marijuana stocks peaked.

So what

Cannabis stocks entered the week with a boost after Virginia passed bills on Friday that could pave the way for marijuana legalization in the state. The trend towards legalization remains a key potential growth engine for companies like Sundial, which have taken steps to expand into the potentially massive US cannabis market.

As a result of its recent stock offerings, Sundial has accumulated approximately $ 615 million in cash reserves. Management has suggested that it could allocate some of this cash to acquisitions, in order to accelerate Sundial’s entry into the lucrative US market.

Producers of sundials and other pot stocks jumped on Tuesday. Image source: Getty Images.

The sundial probably also benefited from Canopy growth‘s (NASDAQ: CGC) better than expected third quarter results. The marijuana grower’s revenue jumped 23% year-on-year to C $ 153 million ($ 120.5 million). This was above Wall Street estimates, which predicted revenues of C $ 150 million.

Investors are probably betting that a strong performance from a cannabis industry leader like Canopy bodes well for other marijuana companies.

Now what

Like several other low-cost stocks, Sundial has caught the attention of traders on social media sites like Reddit. But unlike most of the stocks these traders have crammed into in recent weeks, Sundial’s trading outlook is moving in the right direction.

The cannabis producer has paid off its debt, thereby strengthening its balance sheet and reducing risk for investors. Sundial has also taken steps to reduce operating costs as it strives to achieve profitability. If it can continue to make progress in this regard, further gains could be expected for Sundial shareholders.

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