"Let's face facts. Sears is generating negative operating cash flow of between $1 billion and $2 billion [closer to upper end, it looks like] in 2014," Balter wrote. "Unless it sells off real assets while somehow maintaining the cash flow from those assets, this story is not likely to have a happy ending, and that ending continues to depend on suppliers."
Read MoreFormer Sears exec calls for retailer to liquidate
Sears shares are currently trading near $29, a decline of more than 40 percent this year.
Balter's report follows news earlier this week that Sears CEO Eddie Lampert will provide the company with $400 million in a short-term loan. Fitch Ratings, which downgraded the company's rating to 'CC' from 'CCC' last week, said the loan is a "temporary and short-term fix to a much larger need for liquidity infusion, given significant cash burn in the business."
Further, it "indicates how tight liquidity is going into the holiday season, with the need for additional capital to fund inventory build-up."
Read MoreSears earns 'genius' ranking, tops Neiman, Saks
Balter also pointed to the department store's recent comment that it is not fully committing to apparel buys for Christmas at this time—a comment the analyst said suggests the retailer would be hard-pressed to resupply a popular product.