After some big moves towards the beginning of 2021, Sundial (NASDAQ:SNDL) stock has been depressed.

With the exception of a minor rally that faded, the stock hasn’t moved much in the last six months. I believe that a sustainable rally is long overdue for SNDL stock. At current levels of 68 cents, the stock can possibly double in the next few quarters.

Before any further discussion, it’s worth mentioning that SNDL stock might be classified as a meme stock. However, the company has made meaningful progress in terms of setting a platform for growth and cash flow upside.

There might be a case for holding SNDL stock for the long term. However, business developments need to be closely monitored in the coming quarters.

Growth From Investments

If we look at Sundial’s business model, there are two sources of growth.

First, Sundial has investments (equity, debt and hybrid) in various cannabis companies. These investments are a source of regular cash flow. Further, Sundial has its own cannabis brand portfolio. The company is focused on inhalables and has been vertically integrating in Canada.

Sundial generated $25.2 million in revenue from investment operations. This already implies an annualized revenue potential of $50 million.

There are two important points to note from a growth perspective in this segment –

First, Sundial has a 50:50 joint venture with SAF Group. The JV intends to create a portfolio of debt, equity and hybrid instruments. Sundial has committed $538 million towards the joint venture.

As the portfolio of its investments swells, the income from investment operations is likely to increase significantly.

Furthermore, Sundial expects the global legal cannabis market to touch $47 billion by 2025. This would imply a 130% growth in market size as compared to 2020.

Therefore, if the joint venture is successful in making the right investment decisions, cash flow from the business segment can be meaningful in the long term.

Growth from Brand Portfolio

Besides the investment operations, Sundial also has a presence in the upstream, midstream and downstream cannabis operations.

Earlier in 2021, Sundial acquired Spiritleaf, which has the largest franchise retail network in Canada. More recently, the company acquired Alcanna for a consideration of $346 million.

The latter is Canada’s largest private liquor retailer with 171 stores. It’s worth noting that Alcanna is a strategic partner and 63% equity owner in Nova Cannabis, which is a cannabis retailer with a presence in 62 locations.

With this acquisition, Sundial has two cannabis retail banners and three retail banners in the liquor segment. It’s likely that Sundial will leverage on the liquor retail network to sell cannabis-infused beverages.

Even with the acquisition, SNDL stock has remained depressed. I believe that markets will wait for the consolidated numbers. Once the retail operations show the potential for EBITDA growth on a sustained basis, the stock is likely to surge.

Sundial also has its own branded portfolio of cannabis products. The product basket is focused on inhalables. Further, in September 2021, Sundial launched Caviar Cones for the Canadian market.

It’s the “first of many high quality, high THC and flavorful products” that are expected to be launched. As the number of SKU’s gradually increase, the branded portfolio segment is likely to witness steady growth.

Concluding Views

Earlier in 2021, Sundial had a massive equity dilution. That’s another factor that has kept the stock depressed.

However, once revenue and cash flow growth are seen, the upside can be swift. It’s very likely that the impact of the investments and acquisitions will be seen in 2022.

SNDL stock can still be categorized as a speculative stock. But the company is making serious efforts to make inroads in the global cannabis industry.

It makes sense to consider some exposure to the stock. Given the recent developments, the stock can quickly double. Importantly, there seems to be a bottom in place after the dilution-driven correction.

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On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.