Investors evidently liked Sundial’s (SNDL) announcement of a C$100 million share repurchase program and sent shares soaring to the tune of 28% in last week’s closing session. The announcement was made alongside the company’s F3Q21 (September quarter) financial results, which didn’t quite meet Canaccord’s Shaan Mir’s expectations. The stock has since handed some of its gains back, plunging 14% over the course of this week.

“The results fell shy of our estimates on the whole as the company continues to posture its branded product offering towards premium areas of the market,” the analyst said.

In the quarter, Sundial delivered total net revenue of ~C$14.4 million, amounting to a~57% quarter-over-quarter uptick yet coming in below Mir’s C$15.8 million estimate.

It was the first quarter to comprise some Spiritleaf contribution (the retail chain has been added via the Inner Spirit acquisition), which bought in revenues of ~C$6.1 million in the quarter.

For its core cannabis business, net revenue actually showed a QoQ drop of ~11% to ~C$8.2 million, which Mir believes is down to the “near-term realities of indexing products away from discount pricing.” At the end-user level, Mir notes that discount offerings “maintain prominence,” and as such, the analyst “continues to see challenges” for the company’s core cannabis segment.

While core cannabis revenues still showed a gross loss, higher margin sales from the Spiritleaf chain resulted in the new addition exhibiting over a 60% gross margin in the quarter. This helped the company show a “sizeable improvement” in adj. EBITDA which swung from ~(C$0.2) in FQ2 to ~C$10.5 million in FQ3. “However,” Mir added, “The cannabis segment continues to evade profitability on a stand-alone basis.”

On the investment side, the Alcanna acquisition was the quarter’s highlight, and set to provide the company with access not only to an established alcohol retailer but in NOVA Cannabis, Sundial also gets its hands on a top-5 cannabis retail chain by sales.

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Using the consumer insights data collated from the combined retail platform, Mir believes there is “a lot of opportunity for the company to drive product innovation efforts.” Additionally, the analyst thinks there’s an opportunity for Sundial to “leverage Alcanna’s retail operational know-how” in its Spiritleaf and Value Buds’ banners.

For now, however, Mir sticks with a Hold rating, along with a $0.8 price target, suggesting shares will stay range-bound for the foreseeable future. (To watch Mir’s track record, click here)

2 other analysts have thrown the hat in recently with SNDL reviews, and like Mir, both are on the fence, resulting in the stock’s Hold consensus rating. The average price target stands at $0.89, providing the shares with room for 12% upside in the year ahead. (See Sundial stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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