SNDL (SNDL 2.19%) has been an underwhelming investment to hang on to this year, with its shares down 46% since Jan. 1. However, the company has been attempting to win over investors by diversifying its business to more lucrative areas via acquisitions. These moves have significantly increased its revenue.

If management continues on this trajectory, the company could potentially hit the $1 billion mark in revenue next year. That could make the business a more tenable investment, provided it also leads to profitability. The question is: Can SNDL reach $1 billion in revenue next year, and if it does, will that be enough for things to turn around for the troubled pot stock?

Where the business is right now

SNDL last reported earnings on Nov. 14, when it posted revenue of 230.5 million Canadian dollars ($170 million) for the period ending Sept. 30. On a year-over-year basis, that represented a jump of 1,501% from the prior-year period. SNDL didn't include the results of the recently acquired Alcanna, a top liquor retailer in Canada. That transaction only closed on March 31. Nevertheless, the acquisition of Nova Cannabis -- specifically sales from the Value Buds brand -- drove the bulk of the revenue growth.  

At its current run rate, SNDL's top line could generate approximately $680 million in sales, which would be well short of the $1 billion mark. It would, however, put it in the same league as cannabis producer Tilray Brands, which over the trailing 12 months has generated $614 million in revenue. However, Tilray's business is more centered on cannabis, whereas SNDL has become more of a liquor company these days.

Why SNDL's revenue could continue to accelerate next year

SNDL would need more growth for it to hit $1 billion in sales. And with the company still active in looking for mergers and acquisitions, it's a scenario that may not be all that unlikely. SNDL has recently entered into agreements to acquire multiple cannabis businesses, including Valens, Superette, and the assets of Zenabis

Through these moves, SNDL could further strengthen its top line. And by acquiring Zenabis, it can accelerate its efforts to penetrate a European market that may offer better long-term growth opportunities than Canada, where competition is fierce and margins aren't great.

All these acquisitions could potentially add close to $100 million in revenue for SNDL next year as Valens, the only one that hasn't been in trouble with creditors of late, has generated more than $60 million over its last 12 months. Combined, they likely won't be enough to get SNDL to $1 billion in sales. However, I wouldn't count out more possible deals for SNDL, so there could still be an outside chance that it finds a way to hit that milestone.

Would a sharp increase in revenue lead to profitability for SNDL?

Despite the large increase in revenue last quarter, SNDL still reported a net loss of nearly CA$100 million, and in the period before that, its loss was north of CA$73 million. Impairment charges and changes in the fair value of warrants have weighed down its results. On an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis, the company did achieve a profit of CA$18.3 million in the latest quarter.

Unfortunately, given all the transactions SNDL has been involved in, impairment charges could continue to be a problem for the business. And with gross margins of just 23% in its liquor retail business, which makes up the bulk of revenue, achieving profitability could be a challenge for SNDL even if it achieves significant sales growth next year. Adjusted EBITDA profits are more likely, but investors need to take those numbers with a grain of salt as they include many adjustments.

Is SNDL a buy heading into 2023?

I don't think SNDL will hit $1 billion in sales next year, but even if it comes close to that, it may not be enough of a reason to invest in the cannabis company. With true accounting profitability still looking like a long shot, I'm not optimistic that the business will do enough to attract serious investors behind the business. Dilution remains a concern, especially if SNDL's losses mount, as it may need to issue more shares to continue acquiring businesses. 

Investors would be better off investing in multi-state operators in the U.S. that have more opportunities for organic growth than SNDL, which is overly dependent on acquisitions to boost its top and bottom lines.