Among cannabis stocks, SNDL (NASDAQ:SNDL) has been one that screens well as a value play. Even though this Canada-based integrated cannabis company isn’t cheap on a price-to-earnings basis, SNDL stock has for quite some time traded at a discount to its tangible book value.

But investors who have bought it based on its low valuation have found themselves stuck with a value trap. Despite the valuation discount, as the company has failed to achieve success with its business strategy (deploy its war chest of cash to buy and build its way to profitability), shares have continued to tank.

Worse yet, this could continue, although shares could temporarily move higher after SNDL’s upcoming earnings release on April 14. While a moonshot catalyst could begin to play out, as I’ll detail below, that alone is not a reason to buy.

 A Work in Progress

Back in 2022, it seemed as if the dust had settled with SNDL’s post-meme share price collapse. If you may recall, this cannabis stock went “to the moon” during early 2021. Management took advantage of this newfound popularity by selling as many additional shares as it could.

As a result, the amount of outstanding shares of SNDL stock skyrocketed, from around 25 million at the end of 2020 to over 200 million at the start of 2022. While bad news for existing shareholders, the flip side to this dilution was that it provided SNDL with the aforementioned war chest, which at one point was over $1 billion.

With this capital, the company appeared poised to put it to work through acquisitions and debt investments. This would make this money-losing cannabis firm profitable, justifying a rebound.

Again, this bull case has yet to play out. SNDL has made scores of acquisitions, and has seen in recent press releases, continues to pursue deals. However, “buying its way to profitability” remains a work in progress for the company.

Why the Plunge Could Carry On

After falling from a split-adjusted high nearing $30 per share in February 2021, to around $1.50 per share today, you may believe SNDL stock has finally found a floor. Unfortunately, much like it appeared cheap twelve months ago, only to become cheaper, the same trend could keep playing out.

Yes, in the immediate future, SNDL may have the potential to experience another short-lived rally. That’s what occurred after the company’s last earnings report in November, as InvestorPlace’s Dana Blakenhorn detailed when the event transpired.

Still, while management may once again report small, incremental progress (higher adjusted EBITDA, narrower GAAP losses), this may not be enough to keep shares steady for long.

At least, that’s the view of a Seeking Alpha commentator, who argued back in March that despite the reporting of increasingly better operating results, SNDL continues to burn heavily through cash. This points to a high chance of additional heavy dilution of shareholders, as soon as later this year.

While not for certain, the impact of further losses/dilution may just well push SNDL, which last July reverse-split its way back above $1 per share, could once again be changing hands at sub-$1 per share prices.

What About Legalization?

As I have discussed previously, U.S. Federal legalization of cannabis is a “moonshot” catalyst for SNDL. Even if the company isn’t poised to capitalize on full legalization, in the event it happens, investors will likely bid up the stock in response.

In theory, legalization (if it happens) could easily result in a triple-digit spike for this cannabis penny stock.

However, when handicapping when legalization happens, consider it an exercise in trying to predict the unpredictable. Bipartisan efforts to reform America’s marijuana laws in Congress have failed to make much headway. This comes despite overwhelming support from the American public.

While rapid legalization could always unfold unexpectedly, the potential for this is far outweighed by SNDL’s poor fundamentals and uncertain prospects.

If you’re bullish on cannabis, there are many better choices out there. Take a hard pass on SNDL stock. Consider buying these stronger opportunities instead.

On the date of publication, Thomas Niel did not hold (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.