Tilray Brands (TLRY -0.59%) and other pot stocks have made for abysmal investments in recent years. But when it comes to investing in cannabis, it's all about the future. The prospects for legalization in the U.S. and other parts of the world are what get investors excited about how much growth there could be. Although it's down big right now, could Tilray Brands potentially be an investment that makes you a millionaire in the future?

Why Tilray could make you a millionaire

In August 2021, Tilray's CEO Irwin Simon made a roadmap of how the Canada-based marijuana company might get to $4 billion in annual revenue. It was based on many assumptions and included progress with respect to legalization in the U.S. That unfortunately hasn't panned out, and the company has since pulled that forecast.

But the argument still has merit. If the U.S. legalizes marijuana and if key European countries follow suit, the growth opportunities could be massive. Tilray's advantage is that it already has a strong presence in Europe with CC Pharma, a German-based pharmaceutical distributor that it owns. Tilray also has multiple U.S.-based alcohol companies that give it a way to quickly expand in the U.S. market should opportunities open up there. Plus, it has acquired convertible debt in multi-state marijuana operator MedMen, which provides it with another way to accelerate its growth strategy if and when the U.S. lifts the federal ban on marijuana.

In the long run, there could be many more growth opportunities for Tilray's revenue to go far beyond just $4 billion (over the trailing 12 months, the company has generated $603 million in revenue). Analysts at Fortune Business Insights project that until 2028, the global cannabis market will expand at a compound annual growth rate of 32%.

That's an incredible rate of growth that Tilray could potentially tap into. If it does, the stock has a chance of becoming a 10-bagger investment, or better. Given its heavy losses over the past few years (it's down over 80% since 2021), it could even be a 30- or 40-bagger. The upside for Tilray could be massive. So if those markets open up, the stock could generate some life-changing returns for investors.

Why the stock might fail

The opportunities are there for Tilray to grow, but it will need stronger financials to succeed and to fund all that growth. The cannabis company may boast of its adjusted earnings profits, but what marijuana investors are learning the hard way these days is how much more important cash flow is. Cannabis businesses are cutting costs and shutting down operations to conserve cash, and to prevent having to issue stock and cripple their already weak share prices even further.

Over the trailing 12 months, Tilray has burned through $84 million just from its day-to-day operating activities. During that time frame, it also spent another $279 million on investing-related activities. The company has resorted to issuing stock to fund its operations. It doesn't have a big partner to lean on, such as rival Canopy Growth has in beer maker Constellation Brands. It also isn't sitting on a boatload of money; as of the end of February, Tilray's cash and short-term investments totaled $408 million.

Tilray needs to have a stronger business so that it can capitalize on growth opportunities if and when they arise. Unfortunately, that isn't happening right now, and things may not get better in an overly saturated Canadian pot market where low prices are crippling margins and prospects for profitability.

While Tilray may be ready to capitalize on future opportunities, the risk is that the business may not be strong enough to last that long. It could be years before marijuana becomes fully legal in the U.S. and other parts of the world -- assuming it does at all. This October, it will be five years since Canada legalized recreational marijuana use. Despite the hype, no other major country has followed suit since then.

Investors shouldn't count on getting to $1 million with Tilray's stock

Tilray Brands is an ultra-risky stock, no doubt about it. There's potential for the stock to achieve significant returns in the long run. But until markets in Europe and the U.S. actually open up, that's all that it is -- potential. 

The Canadian recreational marijuana market opened up in 2018, and it has ironically caused more of a headache for cannabis companies. They are still struggling to compete against the illegal market. Government regulation has added excise taxes, and red tape makes it difficult for a big company such as Tilray to leverage its strong brand (advertising is essentially non-existent). So even if legalization does take place in the U.S., it's by no means a slam dunk that Tilray and other companies entering that market will succeed.

It's not an easy road ahead for Tilray, and investors shouldn't expect riches from buying the stock. If you can afford to invest in this pot stock, you should only do so with money you expect to lose, as the risk is incredibly high.