You can’t blame bullish Sundial Growers (NASDAQ:SNDL) investors for thinking SNDL stock might have found a bottom. But after the company reported its second-quarter earnings, a double-bottom line of support was taken out around 78 cents a share.

This should raise two immediate questions for speculators in Sundial Growers: How far will the stock drop? And, perhaps a bigger question, is can anything be done to stop this current round of bleeding?

Any time I write about cannabis stocks, I feel like the teacher that’s grading on a curve. The growth potential of the industry is significant. And even though the United States is not open for business, legalization seems like a case of when, not if.

So I understand the desire to hold onto SNDL stock. There are a lot of penny stocks in the cannabis sector. And when the U.S. does become open for business, it’s likely to be a tide that lifts all boats, at least temporarily.

However, in a market that’s filled with speculative stocks, cannabis stocks look so 2019. For me, that means SNDL stock is only for the most risk-tolerant investor.

One area where Sundial Growers has been excelling lately is in garnering positive ratings from analysts. The company has been rated by six analysts in the last 12 months. Two of those ratings have come out in the last month and both are bullish.

Sundial is a speculative stock. You already know that.

One Step Forward, Two Steps Back

I think that’s an apt description of what investors might think of Sundial’s earnings report. The step forward? There was news to like. In the first place, the company reported a second-quarter net loss of 52.5 million CAD ($41.6 million). That was an improvement from the 60.4 million CAD loss in the same quarter in 2020. And the company noted that without an asset impairment charge of 60 million CAD the company would have recorded positive net income.

Those two steps back? Revenue was a different story. The 14.86 million CAD the company posted was on par with the 14.57 million CAD Sundial posted in the year-ago period. But net revenue from its cannabis segment was 9.15 million CAD was less than the consensus estimate of analysts for approximately 9.43 million CAD.

And the company’s reported negative EBITDA after posting a positive EBITDA in the prior quarter.

Analysts Remain Cautiously Optimistic

The release of an earnings report gives analysts an opportunity to reassess a company’s business. Fortunately for Sundial, analysts are holding the line. One notable view from Cantor Fitzgerald, which had upgraded the stock to neutral in March, reiterated that opinion, pointing to Sundial’s $1 billion cash reserve.

However, the consensus price target for SNDL stock stands at 73 cents per share, which has been consistent for the last 90 days. It also is only approximately two cents above where the stock was trading at the close of business on Aug. 17.

Is SNDL Stock Worth the Wait?

Of course there is no “right” answer to the question “is it worth the wait?” Every investor has multiple considerations relative to their unique position. Sundial did take advantage of its brief time as a meme stock to pay down debt and build up its cash position. That takes any immediate risk of insolvency off the table.

But at some point, cannabis companies need to show that its their business model and not accounting maneuvers that make them good investments. So, it concerns me that the fortunes of Sundial stock seem to rely on federal legalization in the U.S. to bring a lift to the entire sector rather than on its own business model.

As for me, I’d still be looking for the established names such as Canopy Growth (NASDAQ:CGC) or even OrganiGram (NASDAQ:OGI). Neither company has high institutional ownership, but they do have three times the level of SNDL stock. And they both have significantly less short interest.

On the date of publication, Chris Markoch 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.

Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.