SNDL (SNDL -2.50%) shareholders have had a rough go of it, with the stock of the Canadian cannabis cultivator and banking company plummeting by 80% over the last 12 months. It has badly lagged behind the wider market, though it just barely ubnderperformed the wider cannabis industry as measured by the AdvisorShares Pure U.S. Cannabis ETF.

Now, with its revenue from sales of cannabis surging thanks to a couple of timely acquisitions over the last year, and with its quarterly gross margin widening steadily since March 2020, there's perhaps some reason to hope for a brighter future. In time, SNDL's stock might even go on a bull run, though it's not prudent to buy its shares in hopes of one happening tomorrow. Here's why. 

Diversification is a tailwind

When stocks go on a bull run, there are typically several favorable factors at play, and SNDL just might fit the bill one day. Three factors in particular are relevant to SNDL's chances. 

First, the company needs to be growing its top line, preferably while also growing its bottom line, and certainly with a reasonable hope of growing even more in the future. Second, the business needs to have a credible path to retaining its market share in the face of competition. And third, if it can be making headway in multiple markets at the same time due to a diversified business model, that's even more positive catalysts to drive share price appreciation. 

As a result of its acquisitions of Canada's largest private alcohol retailer and a slew of Canadian marijuana businesses, the SNDL of today could eventually check all three of those boxes. In its fiscal Q3 ended Sept. 30, its liquor stores had sales of CAD$152.4 million ($112 million), and its cannabis retail stores brought in CAD$66.2 million. In total, its gross revenue for the quarter was 3% more than in the prior one -- and a dizzying 1,501% increase year over year (YOY). 

Only its liquor segment was profitable, and it grew by just 1% (YOY). But that doesn't really matter, as it's still profitable growth, and there's little reason to think that the competitive landscape for liquor stores in Canada is going to change very much in the near term. At the same time, SNDL's cannabis segment is now vertically integrated after its purchase of the Valens Co.

If management's claims about the existence of economies of scale for cannabis cultivation and manufacturing prove true, it might be the key that enables profitable growth. Right now, its total quarterly expenses are falling YOY as a percentage of revenue, and the break-even point is drawing nearer. At that point, SNDL would meet all three of the conditions for a bull run. 

Conditions aren't yet ripe

As optimistic as the above may be, it's time to throw just a bit of cold water on the prospects of SNDL's stock taking off anytime soon. 

The most important headwind is that the marijuana industry of Canada is suffering enormously from oversupply, and the market is flooded with cheap cannabis. In fact, cannabis is so cheap that some cultivators are complaining that the black market is blocking them from gaining market share. That isn't in SNDL's control, but it does lower the chances of it being able to turn a profit on its sales of weed.

Another problem is that the stock market dislikes cannabis companies at the moment due to the fact that they're typically unprofitable. It's hard to go on a bull run when investors think the entire industry is a bad bet, especially when there are real reasons, like the cannabis glut, to fuel pessimism. 

Then there's the final issue: SNDL's growth hasn't led to investors seeing much in the way of upside over the last few years. Even tacking on huge new segments didn't give it as much of a bump as when it was a meme stock in 2021. And in fact, its reputation as a former meme stock might be a deterrent for more savvy investors. 

Over the next couple of years, if SNDL continues to make progress in realizing efficiencies and maintaining its leading position in the Canadian alcohol and cannabis markets, the conditions for a bull run will finally be assembled, and it'll make sense to buy its shares. An especially favorable quarterly earnings report would probably be enough to invest on, as the company is performing strongly despite multiple bearish forces. Until then, don't bet on big share price gains.