Tilray (NASDAQ:TLRY) stock surged 16% on Tuesday on massive volume. Nearly 70 million shares changed hands in a single session as Tilray delivered its most encouraging day in quite a while.

In the broader view, however, Tilray’s jump barely registers on a long-term chart. You may recall that TLRY stock initially spiked from $20 to $300 following its initial public offering. It then sank to as low as $3 last year. Then, on a massive short squeeze, it powered up to $67. Subsequently, it once again dropped more than 80%. To put it mildly, Tilray’s stock chart has more peaks and valleys than your average ski resort.

So why is TLRY stock on the upswing this time? Is the move set to continue for a reasonable time?

Here’s how things look for Tilray both from a trading and investment perspective.

Digesting the Aphria Merger

A while ago, Tilray announced that it would be merging with fellow Canadian cannabis firm Aphria. The two finally closed their deal this May, becoming the largest marijuana firm in the Canadian market. The new Tilray currently has a revenue run-rate around $800 million and analysts see it growing to $1 billion annually for the fiscal year ending in May 2023.

Tilray remains meaningfully unprofitable for the time being. However, it’s in a much better place than most of its Canadian marijuana rivals. Tilray has sufficient scale to achieve strong scale benefits from operations. It should also be able to wring out cost savings from the Aphria purchase.

In addition, because of Tilray’s large size, it has better access to capital markets. While Tilray has struggled to turn its market opportunity into stable cash flows yet, it has a sufficient business footprint to build confidence. Tilray can raise money both through debt and stock offerings.

To that end, Tilray’s management has suggested that it intends to make more acquisitions and further grow the business. Simply put, the Canadian marijuana market is way too small to support all the companies that started up in the late 2010s. Consolidation is the path forward. Tilray, with its imposing size, is well positioned to be the leading integrator of the Canadian market.

Ahead Of Its Peers

In a vacuum, Tilray’s $800 million of revenues and significant operating losses might not seem particularly attractive. TLRY stock currently sports a market capitalization of around $5 billion, after all. That’s a fairly steep multiple for a company that is growing relatively slowly and is loss-making.

However, Tilray has already achieved positive EBITDA. This means that Tilray would be profitable if not for costs such as interest and depreciation. Nearly all of the Canadian marijuana cultivation firms, including big ones like Canopy (NYSE:CGC), remain EBITDA negative. It’s hard to overstate just how oversupplied the Canadian marijuana industry is right now. Tilray is making the best of a difficult situation.

Better Opportunities Ahead

While the Canadian marijuana market has been a great disappointment, Tilray has a broader horizon. For one, the company has a ton of cultivation capacity. Right now, the Canadian market is much too small to absorb all that cannabis inventory.

Over time, as other markets come online, however, Tilray should be able to use its greater size to its advantage. Tilray is already pursuing international markets such as Portugal. The big one, of course, will be U.S. federal legalization, whenever that happens. There will be plenty of competition with the multi-state operators (MSOs), however Tilray could conceivably be a big player once that market opens. Timing on federal legalization remains uncertain though.

In the meantime, Tilray is also pursuing other avenues. Its merger with Aphria, for example, brought in Sweetwater Brewing. Aphria purchased the Georgia-based craft brewing company prior to its own tie-up with Tilray. This gives Tilray a platform with which to pursue the cannabis and CBD-infused alcohol and drinks market.

TLRY Stock Verdict

Tilray has the right pieces to be a suitable long-term investment in the cannabis industry. It also has a lot of attractive features for a short-term trade as well.

For one thing, it has short interest of nearly 9% of the float. TLRY stock has certainly proven it can short squeeze before; a repeat wouldn’t be shocking. The marijuana sector, after slumping for most of 2021, is also starting to show signs of life. Tilray should show improving metrics as it moves forward following the Aphria merger.

Tilray is not without risk. The company is likely to dilute shares more to fund its future acquisitions. Its core Canadian market is still facing excess supply which will take time to burn through. And federal legalization in the U.S. could remain bogged down for years to come. However, TLRY stock incorporates those risks and then some. After its latest big decline earlier this year, Tilray shares are set to rebound.

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.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.