The Canadian cannabis company Tilray (TLRY -2.19%) hasn't been the best performer over the last six months, with its shares falling by more than 31% while the larger market rose by 14%. Of course, over the last 12 months, its stock has grown by 50%, surpassing the market's 31%, making its recent pullback all the more intriguing for investors.

Is Tilray on track to be a strong performer in 2022, or is its tenuous positioning relative to the rapidly opening U.S. cannabis market going to be a problem? As it turns out, both of these things can be true.

A cannabis farmer works in a greenhouse.

Image source: Getty Images.

What's going right

Right now, Tilray holds the largest share of the recreational and medicinal cannabis markets in Canada. But it also has a significant presence in the German medicinal market, where it leads the marijuana extracts segment. And while it doesn't yet sell cannabis in the U.S., it does sell beer there via its SweetWater Brewing Company subsidiary. Per its latest earnings report, successfully competing in these segments led its quarterly revenue to grow by 43% year over year (YOY), which is quite rapid.​​

At the same time, the company is realizing cost synergies totaling $55 million to date from its recent merger with Aphria. That's helped its gross margin improve somewhat, leading to gross profits rising by 46% YOY, but it hasn't brought Tilray anywhere near the doorstep of profitability as of yet.

Importantly, in August, it announced that for $165.8 million, it had acquired most of the senior secured convertible notes and warrants issued by MedMen (MMNF.Q) an American cannabis company. If these notes are converted and the warrants are exercised, Tilray would own 21% of MedMen, but per the deal's fine print, that can only happen if the U.S. legalizes cannabis at the federal level. Therefore, Tilray has a pathway to entry into the U.S. recreational market precisely when that market fully opens for business.

For shareholders, the transaction is good news because it addresses the long-standing issue of the company's access to the U.S., but things are still far from perfect.

What's going wrong?

As favorable as its revenue growth, margin improvements, and its new stake in MedMen are, Tilray's positioning relative to the U.S. remains weak.

Its share of MedMen won't be a majority even if cannabis is legalized federally, so its access to the market will continue to be limited. MedMen is not a powerful competitor in the U.S. either. It isn't profitable, and according to its most recent earnings report, its quarterly revenue only rose by 13.4% year over year in Q3. And given its trailing revenue is only $149.76 million, MedMen's $446.9 million in debt is a big liability that means it probably won't be able to grow very quickly over the next couple of years, not until it prioritizes deleveraging.

So, cannabis legalization should probably not supercharge Tilray's stock even though recent political murmurs on the subject have led to a few volatile days.

It's a risky purchase

As a Tilray shareholder, I hesitate to recommend the stock to other investors at this time.

While I remain confident in the merit of the company's plans to continue expanding into the EU and increase its lead in the Canadian market, it has yet to demonstrate that it can operate profitably with the market share it currently has. And while it's true that it needs some strategy for grabbing market share in the U.S. in the event of legalization, its deal with MedMen doesn't seem like it'll be very helpful for shareholders, as MedMen has a plethora of problems of its own.

Nonetheless, if Tilray's margins continue to improve alongside its snappy pace of revenue growth, eventually the market will need to recognize its trajectory. If you're looking for a cannabis stock that's banking on a turnaround, this could well be the one -- just be aware that you might have to wait a few years for it to happen.