The stock of SNDL (SNDL -2.44%), the Canadian cannabis and alcohol company formerly known as Sundial Growers, is down by more than 80% in the past three years, but some analysts on Wall Street are still keen on it. Based on an average of their estimates, its shares could jump by as much as 114% in a year, which for most stocks would make it a screaming buy.

But is SNDL worth buying right now, or does Wall Street have it wrong? Let's investigate. 

Its performance is improving, but it's still a mixed bag

It's easy to see why analysts have such high hopes for SNDL; it recently acquired several businesses in Canada that will make its top line boom. 

The most recent purchase was the Valens, a vertically integrated marijuana operator, which management claims should push SNDL's annual revenue above $1 billion in Canadian dollars ($724 million). For reference, in 2021 its sales totaled only CA$56.1 million. By the third quarter of 2022 alone, it was bringing in CA$230.5 million, so management's estimate is likely on the nose, and if revenue growth has any impact on a stock's price (it often does), Wall Street's supposition isn't crazy.

Aside from its acquisition-fueled growth, the stock is also valued extremely inexpensively. Its price-to-book (P/B) ratio is just 0.4, which means that the shares are valued at less than the value of the company's tangible assets. At a minimum, that means the valuation risk of buying shares of SNDL is very low, and nobody can claim that the stock's price is at a hype-driven premium.

But there are a few reasons this stock is so cheap despite the reasonable chances of it continuing to rapidly build revenue.

Waiting is still the best move for the moment

The trouble with SNDL is that it isn't profitable, and it still needs to right-size its operations to find a good fit between the level of demand in the Canadian cannabis market and its output.

When management speaks of right-sizing, it means cost-cutting, typically in the form of site closures and layoffs, which SNDL is doing as of Feb. 13, when it announced the scaling down of one of its production locations in Alberta.

The move should save CA$9 million annually, and it comes as the company is signaling that it should soon report record revenue and significant strides toward profitability at the end of March, when its next earnings release will be published. Keep an eye out for those earnings because they will provide a crucial update about the company's strategy for both stoking growth and increasing efficiency. 

Management says that the closure will help SNDL to lower its cost of goods sold and its gross margin for cannabis, and it probably will. Furthermore, the company's progress over the past year is decent as its gross margin widened slightly while it trimmed production costs as a percentage of revenue, suggesting that it's becoming a bit more efficient despite its major acquisitions.

But the timeline to reaching actual profitability remains unclear, and perhaps quite distant. Conditions in the Canadian cannabis market are quite unfavorable at the moment, with a glut of the product forcing prices down and compressing margins.

And while production cuts across the industry will eventually lead to higher prices once again, the market headwinds are difficult to deal with by saving a few million here and there via cost efficiencies.

Separately, the bear market is continuing to levy a brutal toll on cannabis stocks and growth stocks in general, especially those that are unprofitable. That isn't anything within SNDL's control, either, but it does explain the stock's lack of appeal today. 

So with all that in mind, you probably shouldn't buy shares of SNDL right now, regardless of what Wall Street thinks. Once it starts making major strides toward profitability instead of baby steps, that might change. But for now, steer clear unless you are willing to take a big risk that could take some time to pay off, if it ever does.