The parent company of Smoker’s Corner, Canna Cabana and Kush Bar received its first formal analyst coverage on Thursday, with Canaccord Genuity’s Kimberly Hedlin initiating coverage of High Tide with a speculative buy rating and a $0.60 per share target.
Given the Calgary-based company’s Thursday closing price of $0.28 per share on the Canadian Securities Exchange, the target means Ms. Hedlin expects the stock to more than double over the next 12 months to reach a new record high.
“With a growing retail presence in Canada and a strong platform to expand into the United States, we are forecasting a 5-year [compound annual growth rate] of 30 [per cent], along with several material potential catalysts that could result in a re-rating,” Ms. Hedlin said in her first note to clients on HITI.
She considers investments from major licensed producers Aurora and Aphria ($11-million and $4.5-million convertible debenture deals) to be a “validation of management”, noting the company has been involved in the legal cannabis retail space since well before recreational legalization last year.
Founder and CEO Raj Grover started the Smoker’s Corner chain of accessories stores in 2009.
The company expects to have 21 locations open by the end of summer 2019, including three affiliate stores operating in Ontario through agreements with provincial cannabis retail lottery winners.
“While we believe retail is generally quite competitive, we forecast above-average retail margins through the introduction of house-branded products over the coming year,” Ms. Hedlin said.
The road to profitability could be a challenging one, however. High Tide actually lost money in its 2018 fiscal year as costs rose and its wholesale arm had to write off $800,000 in loans made to a company called E-Liquid Therapeutics, which is owned by Mr. Grover’s sister.
– Jameson Berkow