By John Whitefoot, BA @ Profit Confidential
HITIF Stock’s Outlook Remains Bright
There are few cannabis stocks that have as much going on for them as High Tide Inc (CVE:HITI, OTCMKTS:HITIF). And there are few marijuana stocks that are providing as much upside potential as High Tide. And that’s saying something.
High Tide stock is up 400% year-over-year and 150% year-to-date.
Judging by everything going on at High Tide Inc, it looks like 2021 will be a monumental year for the company.
Its recent share-price movement might not point to that, though. Right now, HITIF stock is down 44% from its February highs. The recent beatdown, which has taken the wind out of the broader cannabis industry, has put High Tide stock in an attractive price range.
Despite the recent softness in the price of HITIF stock, the company has announced strong first-quarter results, which include a huge revenue increase and record adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
Moreover, High Tide Inc has opened a raft of new cannabis retail stores, and it has announced an acquisition. The company also filed for a large base shelf prospectus.
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High Tide stock is only trading at $0.49, but it might only be trading at that low level for a little while longer.
Chart courtesy of StockCharts.com
HITIF Stock Overview
High Tide operates a chain of 83 branded retail locations in the Canadian provinces of Alberta, Ontario, Manitoba, and Saskatchewan. Even though it only has stores in four of Canada’s 10 provinces, High Tide has one of the largest pot retail presences in the country. (Source: “Investor Fact Sheet: April 2021,” High Tide Inc, last accessed April 20, 2021.)
By revenue, High Tide owns the largest cannabis network in the country—and it’s still growing. High Tide has been focusing its efforts on opening new stores in Ontario, which is Canada’s most populated province. By the end of fiscal 2021 (October 31, 2021), it expects to be running 115 stores.
High Tide Inc’s brick-and-mortar locations operate under the “Canna Cabana,” “newleaf,” “META Cannabis Co,” and “KUSHBAR” banners.
Those who can’t make it to the company’s physical stores can visit “Grasscity.com” and “SmokeCartel.com,” which had more than 33 million combined visits in 2020. The majority of the traffic to those two web sites comes from the U.S.
In May 2020, High Tide launched “CBDcity.com,” which, as the name implies, sells cannabidiol (CBD)-focused products.
In addition to operating a huge brick-and-mortar and online business, High Tide Inc operates Valiant Distribution, through which it designs and manufactures cannabis lifestyle products and consumption accessories.
The company has facilities in Calgary, AB and Las Vegas, NV. Of the more-than-5,000 stock-keeping units (SKUs), 75% of the company’s catalog is manufactured in-house, allowing it to maximize margins. Valiant has partnered with celebrity brands including Snoop Dogg, Paramount Pictures Corporation, Hellboy, and Guns N’ Roses.
Retail Footprint Expands Across Canada
High Tide Inc has recently announced a number of new retail store openings.
In March, High Tide opened locations in Burlington, ON and two new stores in Calgary.
In April, the company expanded into Ottawa, ON, with the opening of its newest META Cannabis retail store, which is High Tide’s 83rd branded location in Canada and its 17th in Ontario. The company also opened new Canna Cabana retail stores in Medicine Hat, AB and Toronto, ON.
Another Step Toward Uplisting to Nasdaq
In March, High Tide announced that it filed a Form 40-F Registration Statement (similar to a Form 10-K for U.S.-based companies) with the U.S. Securities and Exchange Commission (SEC). (Source: “High Tide Announces Filing of Form 40-F with SEC Fulfilling a Significant Milestone for the NASDAQ Listing,” High Tide Inc, March 22, 2021.)
That fulfilled a significant milestone in the process of listing High Tide stock on the Nasdaq.
“We were the first Canadian cannabis retailer to pursue this prestigious listing on Nasdaq and we believe it will allow us to greatly expand our shareholder base, enhance shareholder value and accelerate our already aggressive [merger-and-acquisition] initiatives in Canada, Europe and the United States,” said Raj Grover, president and CEO. (Source: Ibid.)
He added, “We are currently in several discussions with potential acquisition targets in these jurisdictions and look forward to updating the market soon.”
Acquisition of Leading E-Commerce Retailer
Also in March, High Tide Inc announced that it completed the $8.0-million acquisition of Smoke Cartel, Inc. With this, High Tide now operates the two largest e-commerce platforms for cannabis consumption in the world.
With the acquisition, High Tide has considerably expanded its footprint in the U.S. market, and is very optimistic about its position to begin online cannabis sales should the U.S. move forward with federal marijuana legalization. (Source: “High Tide Acquires Leading E-commerce Retailer Smoke Cartel,” High Tide Inc, March 24, 2021.)
Base Shelf Prospectus
Speaking of acquisitions, on April 9, High Tide announced that it filed for a base shelf prospectus of up to $100.0 million (US$79.75 million). (Source: “High Tide Files Preliminary Base Shelf Prospectus,” High Tide Inc, April 9, 20201.)
The prospectus—which is valid for common shares, warrants, units, subscription receipts, debt securities, convertible securities, or a combination thereof—will be in effect for 25 months.
High Tide only has a market cap of US$313.0 million, which suggests that a big financial injection could be used to make some pretty substantial moves.
The company has said it will use net proceeds from the sale for general corporate purposes, capital projects, internal expansion, or the acquisition of other businesses, assets, or securities.
Strong Q1 2021 Results
High Tide announced that its revenue for the first quarter of fiscal 2021 ended January 31, 2021 increased 179% year-over-year to $38.3 million. (Source: “High Tide Reports First Quarter 2021 Financial Results Featuring a 179% Increase in Revenue and Record Adjusted EBITDA of $4.6 Million,” High Tide Inc, March 31, 2021.)
Geographically, $34.2 million of that revenue was earned in Canada, $3.9 million in the U.S., and $200,000 internationally. Segment-wise, $36.8 million of the revenue was generated by retail, $1.5 million by wholesale, and an immaterial amount by corporate.
High Tide Inc reported a first-quarter 2021 net loss of $16.8 million ($0.04 loss per share), versus a first-quarter 2020 net loss of $3.9 million ($0.02 loss per share).
The company’s gross profit increased by 208% to $14.8 million, compared to $4.8 million in the same quarter of the previous year. Its adjusted EBITDA for the first quarter of 2021 were $4.6 million, compared to an adjusted EBITDA loss of $800,000 for the same quarter of the previous year.
High Tide finished the first quarter of 2021 with cash on hand of $16.6 million, compared to $7.5 million at the end of the fourth quarter of 2020 (October 31, 2020). The company’s cash balance has since increased to $33.0 million.
High Tide Inc has been busy in 2021. Despite facing the same challenges as any retailer during the COVID-19 pandemic, the company crossed its 80-store milestone across Canada. By the end of October, High Tide should have 115 stores.
The company also applied to list High Tide stock on the Nasdaq, completed an acquisition, and is pursuing expansion opportunities in the U.S. and Europe.
All of these actions should help the company deliver on its significant growth milestones in 2021 and increase the value of HITIF stock.