Like many other pot stocks, Aurora Cannabis (NYSE:ACB) has taken a tumble. After pushing past $12 a share in October, ACB stock can now be had for less than half that amount.

The decline isn’t necessarily a surprise. An $11 billion-plus market cap for ACB seemed a stretch. As Luke Lango correctly predicted, the Oct. 17 legalization of marijuana in Canada turned out be a “sell the news” event. The NYSE listing of ACB stock less than a week later turned out to have a similar effect, as I wrote at the time.

Yet even after the pullback, Aurora Cannabis stock hardly looks cheap. A market cap of around $5.5 billion is still probably about 30x or more fiscal 2019 (ending June) revenue. ACB stock — like other pot plays — is likely to trade on sentiment for some time to come. It wouldn’t be a surprise if Aurora Cannabis shares were back at $10 a piece next year; even $2 wouldn’t be a shock (still a ~$2 billion valuation) . Indeed, the options market is pricing in a 50%+ drop in ACB just over the next seven and a half months.

That said, Aurora Cannabis stock could be intriguing to the right kind of investor. Two key aspects of the stock and the industry show why.

Opportunity in Softgel Capsules

On Monday, Aurora launched its line of cannabis softgel capsules, an opportunity that sounds potentially enormous. Aurora said in the release that it expects weekly production, at scale, of at least 1.4 million capsules. Pricing for the four products — three for the medical market and a CBD offering for consumers — is expected to be $45 for a 30-capsule bottle.

Back-of-the-envelope math suggests a nice opportunity here. Calculating 70 million-plus capsules a year at $1.50 per capsule results in sales of more than $100 million annually. Aurora isn’t capturing all of that revenue — it only owns 20% of the manufacturer, for instance – but its diversified model means it should get a big chunk, and at high margins.

Against FY19 sales likely in the $150 million range (after $30 million in fiscal Q1 revenue), softgels alone seem to suggest a significant growth driver. Assume net margins of 20% on total sales and a 30x earnings multiple and this opportunity could be worth well over half a billion dollars. With so many similar opportunities for Aurora in Canada, overseas, and eventually the U.S., softgels might be indicative of just how profitable the company can be.

Questions Surrounding ACB Stock

But that opportunity also highlights the questions surrounding ACB stock and the industry. How long, exactly, does it take to reach scale? If it’s two to three years, then that $600 million hypothetical valuation is worth $400 million-plus, discounted back. If it’s a decade (at a 10% discount rate), those modeled profits add ~$250 million to fair value.

Is the opportunity realistic? To be sure, 70 million capsules is a big number: roughly two per year for every single man, woman, and child in Canada. Cannabis and CBD users may prefer other methods of ingestion (that seems particularly true given dosing questions surrounding CBD).

Will Aurora be alone in the market? If margins are truly impressive, won’t rivals simply enter and undercut on price? Does a bottle that costs $45 in 2019 wind up costing $17 in 2025? Prices for legalized marijuana in the U.S. already are plunging for similar reasons. Softgels obviously are a different market but general business principles still likely apply.

The bear case for cannabis stocks often focuses on the long-term view that manufacturing any commodity eventually becomes a low-margin effort. Why is marijuana going to be any different? If it’s not, the tens of billions of dollars in market value being assigned to marijuana stocks already is inflated.

Similarly, if efforts like softgels become huge profit centers, the diversified model here probably moves ACB stock higher. However, if Aurora becomes just another retailer/manufacturer play, Aurora Cannabis stock already may be overvalued.

Dot-Com Bubble and Aurora Cannabis Stock

Skeptics — myself included — have likened marijuana stocks to the dot-com bubble. It’s important to remember that e-commerce did turn out to be a huge trend, only eventually. But even Amazon.com (NASDAQ:AMZN) took years to return to its 2000 peak, and many early leaders (Yahoo!, AltaVista, Pets.com, etc.) were either surpassed and/or went bankrupt.

The lesson is that cannabis can turn out to be a huge, growing, worldwide industry and ACB stock still can be overvalued.

But there’s another way to compare the two eras that highlights how interesting marijuana stocks are at the moment. It’s difficult to evaluate stocks when there is no history for the entire industry. We have estimates, for example, of what recreational marijuana sales were in Canada before legalization. But they are just estimates and the parameters of a legal market are vastly different.

The sudden emergence of such huge markets — perhaps counterintuitively — makes investing more difficult. Is Aurora Cannabis a better company than Canopy Growth (NYSE:CGC)? Maybe. How can you tell? It’s hard to judge management when those managers have only been running a company of that size for a few quarters.

Is ACB a better stock than Tilray (NASDAQ:TLRY)? Or Cronos Group (NASDAQ:CRON)? Why? Comparing valuation multiples isn’t necessarily that useful: 30x revenue isn’t necessarily cheaper than 40x. Which company has the best products? The best brands?

Right now, the answers to all those questions are guesses. No one in 2000 was buying AMZN stock because it was going to diversify away from books into becoming the world’s largest e-commerce retailer. They guessed and — assuming they held — guessed right.

Anyone involved in the cannabis space has to understand that nothing is guaranteed. It’s possible that in five years, market leadership in softgels will be a key reason to buy ACB stock. It’s also possible that Aurora could fall behind in the space, and Monday’s release looks like yet another overoptimistic promise from a failed management team. At a minimum, investors have to remember that and remain flexible.

As of this writing, Vince Martin has no positions in any securities mentioned.