Tilray (NASDAQ:TLRY) stock has exemplified the long and painful story of the commercial cannabis industry. TLRY stock rose to as high as $150 per share following its initial public offering in 2018. Since then, incredibly enough, Tilray has lost 98% of its value from the peak.

Based just off the stock chart, it would seem like Tilray is a failed business. And it definitely has problems. Despite the burgeoning size of the marijuana industry, Tilray hasn’t yet achieved consistent profitability.

First, the Bad News

As our Mark Hake noted, Tilray continues to lose money. That’s not just on an accounting basis either. Tilray also generated negative $51 million of free cash flow (FCF) last quarter. Annualized, that’d be more than $200 million of outflows. And, with a recession seemingly looming, consumers may lower their spending on discretionary goods such as cannabis, further impacting Tilray’s cash flows.

Tilray has seen profitability issues because it simply built a bigger footprint than the market can currently support. Tilray has prided itself on creating a global cannabis business with operations in Canada, the Americas, Europe and more. But getting all the people and logistics in place for that is pricey. Tilray is also expanding into additional cannabis products, beverages and more. Throw in a weak Canadian retail marijuana market, and it has been tough sledding for the company.

Investment bank Piper Sandler added to the bad news. Their analyst recently slashed the TLRY stock price target from $6 to just $3. Their downgrade claimed weakening sales momentum for Tilray along with unfavorable exchange rate swings as factors which could harm Tilray’s near-term results. That’s all valid, but a 50% price target cut seems overblown merely on those concerns.

Improving Management Discipline

The most important factor for a potential Tilray turnaround is that the company has learned from its past mistakes. Tilray isn’t spending so aggressively on new ventures. It has instead concentrated on acting more prudently and rationally while expanding at a more measured pace.

CEO Irwin Simon hit this nail on the head in the company’s most recent conference call. Here is Simon talking about potential acquisitions for Tilray:

“[T]rust me, we see lots of acquisitions in plant-based products, in spirits, beer, in beverage, in cannabis, in CBD … but making a bad acquisition would not be good for us. And there’s plenty of acquisitions we’ve looked at and some of the best acquisitions are the ones we walked away from.”

This is the voice of an experienced operator. Tilray has previously spent capital poorly on projects that have failed to live up to their potential. Now, however, the company is taking a much more disciplined approach to spending its funds.

And, it’s important to note, that Tilray is in an advantaged position. It has cash on hand, and it already has sufficient operating scale. Tilray is one of the world’s largest cannabis companies and thus doesn’t have to make rash moves to remain viable. It can take its time and only deploy capital when the moment is right.

Positive Signs for Tilray

Despite TLRY’s stock price hitting fresh lows, there are some potential positives out there. For one, Tilray remains on target to hit its longer-term revenue targets, namely $4 billion annually by the end of 2024. As Tilray uses more cost discipline, this level of revenue should allow it to generate meaningful profits.

For another thing, short-term trading sentiment is completely washed out. Shares are down 17% just over the past month and 52% year-to-date. However, the bears haven’t given up. In fact, short interest has climbed to 14% of the float. This could set the stage for a sharp rebound rally if shorts overstay their welcome once sentiment starts to turn around.

TLRY Stock Verdict

To be clear, Tilray still faces a series of longer-term challenges and obstacles. The company’s ultimate success remains an open question.

However, with shares now down to just $3, it’s hard to see how they will fall much further in the short-term. If you want to see capitulation, this is what it looks like. Piper Sandler’s 50% price target cut this week puts a decisive exclamation point on that.

So is Tilray a great long-term investment? Only time will tell. Is it a tempting short-term swing trade? Absolutely. TLRY stock could easily pop back up to $4 or even $5 in coming weeks once this current market rout finally ends.

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