Advocating for a cannabis play like Canopy Growth (NASDAQ:CGC) stock is tough these days.

With the legal status of medical and recreational marijuana in constant flux, investors turn their attention towards safer bets. But CGC stock has fallen substantially from a 52-week high of $56.50 on Feb. 10. it trades a little above $18 today.

Under these circumstances, Canopy Growth warrants another look. The past year has been an exciting one for the company, with plenty of acquisitions and even a couple of positive earnings reports.

Plus, with a short interest ratio of 17.1%, the Reddit crowd could potentially latch onto this one and drive the stock upward. With this in mind, the stock is an intriguing short-term trade.

However, CGC stock is not a buy-and-hold investment as of yet. Despite 37% revenue growth in FY 2021, net loss came in at 1.7 billion CAD, a 283 million CAD wider loss year over year.

Per the company’s press release, the reason for the wider loss was not because of any operational issues, and it expects to post a profit within the next 12 months, but there are several other companies in the cannabis space that are now profitable.

And remember, Canopy Growth does not have a substantial footprint in the lucrative U.S. cannabis market.

So, Canopy Growth could become profitable by the year-end, but there are too many variables to make a strong case.

This means you should wait for CGC stock to gain more ground and then take your profits. There are not enough catalysts to confirm the company’s long-term success.

CGC Stock and Its Prospects

There are three main areas through which Canopy Growth can sustain any spikes in its stock price: solid fundamentals, expansion into the U.S. market and aggressive mergers and acquisitions (M&A) activity.

In terms of financials, Canopy has its work cut out. Despite growing revenue both for the fourth quarter and fiscal year 2021, the company reported a net loss of 617 million CAD for its fourth quarter, alongside an annual net loss of nearly 1.7 billion CAD for its 2021 fiscal year.

The company said it was on track for positive adjusted EBITDA during the second half of its current fiscal year, which ends March 31, 2022. That was the only piece of good within this particular earnings release.

Overall, it was the second time in a row that CGC has disappointed Wall Street. Before that, it managed to string together two earnings beats on the back of record consumption in the Canadian markets.

It was not unexpected. People were sitting at home with little to do, so the Canopy product sold well. But now, sales are slowing in Canada, and many cannabis producers in the Great White North are looking to the U.S. market for solace.

However, federal marijuana legalization is far from a bi-partisan issue. Marijuana legalization may appeal to voters in both very blue and red states, but things are a bit different on the floor of the house. Many hoping President Joe Biden would usher in legislation on this topic within his first 100 days in office stand sorely disappointed.

Mergers & Acquisitions Galore

Back in April 2019, Canopy Growth agreed to purchase Acreage Holdings subject to U.S. federal cannabis legalization. So, it has a plan for the American market if the “triggering event” occurs.

Recently the two companies reworked the terms of the agreement. According to the deal last year, Canopy had to buy 100% of Acreage dependant on marijuana legalization in America. Now it will only have to buy 70% of Acreage in case of federal legalization.

For the period ending March 31, Acreage posted an adjusted EBITDA profit of $1.6 million. It may seem like a minuscule figure, but it’s still a start in a very lucrative market.

Apart from Acreage, Canopy Growth has also purchased Supreme Cannabis, a Canadian cannabis company that has reported three consecutive quarters of positive EBITDA.

Intriguing Short-Term Play

In the current climate, I do not foresee anyone holding CGC stock past the next six months. Considering Redditors have an affinity for this space, there is merit to buying in hopes of a potential spike.

Long term, management will need to address several issues before the company becomes a world-beater. U.S. legalization will play a key role in Canopy Growth’s profitability moving forward. If the matter gets gridlocked in the House and Senate, Canopy Growth will rely on its Canadian operations. So far, that has not been a recipe for success.

The M&A activity is healthy and certainly a step in the right direction, but it will also take time to streamline operations and realize synergies.

Investors will have to reconcile with this fact and be prepared to stick around for the long haul. All things considered, it is best to treat CGC stock as a short-term play.

On the date of publication, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.