Sundial Growers (NASDAQ:SNDL) is popular among meme stock traders and cannabis aficionados, but it hasn't exactly had a gilded life on the market. The stock is down almost 10% over the last six months, though it is up 44.7% year to date.

There's reason to expect that 2022 will be a less turbulent time for Sundial than 2021, so it makes sense for investors to evaluate the stock with a critical eye. Has Sundial finally reached the point where its prospects are more positive than negative, or is it still fundamentally just a meme stock that's going nowhere fast?

A cannabis farmer inspects crops in her field while holding a tablet.

Image source: Getty Images.

Why now might be favorable for a purchase

Sundial has had quite the arc over the last couple of years, and it's largely a different company now than it used to be. 

Whereas its revenue was formerly derived solely from the cultivation and sale of cannabis, since its stock became the subject of the attention of Reddit's trader army in early 2021, it was able to raise significant capital by issuing new shares and warrants. And it's using that funding to branch out into being, essentially, a cannabis sector investment bank. 

Through the first three quarters of 2021, it reported making CA$18.2 million in investment income off its CA$489 million in deployed capital. By way of comparison, in Q3 it reported net cannabis sales revenue of CA$14.4 million. So, its investments will likely continue to be an important supplemental income source over time, but they aren't going to eclipse cannabis sales.

And, with its planned acquisition of Canadian liquor chain Alcanna for CA$346 million in stock, Sundial will soon have yet another segment to fuel revenue growth. That could bode well for the company, though there's also a chance that its impact on the cash burn rate may be detrimental.

There's still plenty of risk in Sundial shares

One major issue with Sundial is that it doesn't yet have a track record of success in any of its business segments. Its quarterly revenue is growing quite slowly, even when considering investment income. And, while the acquisition of Alcanna will diversify its business, Sundial has no particular competitive advantages or special acumen in the liquor business.

Sundial also recently announced a CA$100 million share repurchase program, which will help to unwind some of the dilution it underwent when it raised its stockpile of investment cash. While stock repurchases are usually a good sign, this one should raise investors' hackles. 

When management throws money into share repurchases, it's communicating that this strategy will be a good one for shareholders. For a young company like Sundial, though, it typically makes more sense to reinvest whatever money it has on hand into growing the business. 

The implication here may be that Sundial can't easily pour its excess cash into investments or acquisitions that have better potential to grow its revenues, and that's a big problem. Giving cash back to shareholders in the form of a repurchasing campaign may work to pump up the stock, but it doesn't secure the future of the company, nor does it necessarily support long-term value.

There probably won't be a penalty for waiting longer

At present, I wouldn't be rushing to buy this stock. 

But, as the company continues to grow into its new role as a strategic cannabis investor, it's important to recognize that things are changing for the better. It reported a positive net income from operations for the first time in the third quarter, and it still has CA$571 million in unrestricted cash to invest in growth. If it can replicate that progress in subsequent quarters, its share price may pick up steam too.

Until investors see that happening in future quarters, however, it'd probably be best to wait before adding this stock to your portfolio -- unless you're particularly tolerant of risk.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.