This year will be a big test for cannabis company Sundial Growers (NASDAQ: SNDL). With one recent acquisition closed and another that could be complete in the next few months, the business is undergoing some significant changes that will likely dictate the direction of its share price this year.

In 2021, its stock was up over 400% at one point and ended up finishing the year with a 22% gain -- far better than the Horizons Marijuana Life Sciences ETF, which fell 19%. Can Sundial continue to outperform the broad marijuana index, or will 2022 be a tougher year for the stock?

Why its shares could skyrocket

There are multiple scenarios where I can see Sundial having a great year.

The first way is through posting strong quarterly results. In two of its last three periods, the company has reported positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Many marijuana producers in Canada struggle to stay out of the red, and if Sundial can continue to record positive numbers on its bottom line, that can help make it a more attractive stock to buy compared to its peers. And if it can accomplish that while also getting the boost it'll likely get from recent acquisitions, including alcohol retailer Alcanna (which has cannabis shops in its portfolio through its subsidiary Nova Cannabis), that will only make the pot stock look that much more impressive. Canadian pharmaceutical and cannabis company, Tilray recently posted its quarterly results. And while it recorded a profit, its sales were down 8% on a quarter-over-quarter basis; growth in the cannabis sector is hard to come by. Balancing that with strong adjusted EBITDA numbers can make Sundial a top stock to own.

In both of these scenarios, however, a lot would need to go right for either the industry or Sundial itself for the stock to take off.

Why Sundial could crash

It's not hard to see why Sundial's stock could crash this year. The company is a dilution machine, and between share issues and warrants, that could drive the stock down, even if it performs well. During the past 12 months, the company has issued common stock worth more than 1.2 billion Canadian dollars. A problem for Sundial is that it hasn't been generating positive cash flow. While it is posting positive adjusted EBITDA, it consistently burns through cash, and over the past four quarters, it has used up CA$173 million in its day-to-day operating activities. That doesn't include what it has spent on acquisitions, which has totaled more than CA$400 million during the same time frame.

What may exacerbate the issue is its acquisition of Alcanna (which remains pending but should close in the first quarter of this year) and also retail pot shop operator Inner Spirit -- that transaction closed in July 2021. These acquisitions, while promising for Sundial's future growth, could be a drag on its cash flow this year.

The positive is that as of Nov. 9, 2021, Sundial had CA$571 million in unrestricted cash on hand, providing it with plenty of cushion to keep its business afloat before it may need to issue more shares.

Which scenario is more likely?

In terms of probability, a crash in Sundial's share price looks more likely than the stock skyrocketing. Sundial may be in for some hard times ahead as it gets into a highly competitive retail pot market. Although it has generated some decent results of late, that may not be sustainable because expenses are likely to increase. And I'm not overly optimistic about U.S. legalization giving it a lift, either. U.S. President Joe Biden hasn't indicated he's in favor of legalizing pot, and that looks like a long shot in 2022, at best.