By John Whitefoot, BA @ Profit Confidential
Why High Tide Stock Could Climb
High Tide Inc (NASDAQ:HITI) is one of the most overlooked pot stocks going. And if Wall Street is any indicator, it’s also one of the most undervalued.
That’s saying a lot, especially when you consider that High Tide stock is up by 210% year-over-year and 130% year-to-date.
Sure, HITI stock is listed on the Nasdaq, but because High Tide Inc is based in Canada, it often gets overlooked by U.S investors.
Wall Street thinks that’s a mistake. Of the analysts covering High Tide stock, their average 12-month price target is $13.50, with a high estimate of $15.00. That points to potential gains of 95% and 116%, respectively.
Why the bullish sentiment? There’s a lot going on at High Tide Inc.
Chart courtesy of StockCharts.com
HITI Stock Overview
High Tide operates a chain of almost 100 “CANNA Cabana” retail locations across Canada, giving it one of the largest brick-and-mortar marijuana retail presences in Canada. In fact, by revenue, High Tide has the largest retail cannabis network in the country. (Source: “Investor Presentation: September 2021,” High Tide Inc, last accessed September 20, 2021.)
And it’s going to get a lot bigger. By the end of calendar year 2021, High Tide expects to be operating 110 stores. The company’s current long-term target is 200 locations.
High Tide also has a huge online presence, which includes three of the five most popular online platforms for marijuana consumption accessories in the world.
The company’s web sites include “Grasscity,” “SmokeCartel,” “DailyHighClub,” “DankStop,” “FABCBD,” and “CBDcity.”
High Tide Inc’s wholesale segment designs, manufactures, and distributes proprietary and licensed marijuana consumption accessories.
Valiant Distribution and Famous Brandz offer more than 5,000 stock-keeping units (SKUs), including celebrity and studio-licensed products (e.g., “Snoop Dogg,” “Cheech & Chong,” “Guns N’Roses,” “Jay & Silent Bob,” “Jane West,” and “Trailer Park Boys”).
Since the start of 2021, the company has totally transformed itself across all key metrics.
The number of High Tide Inc’s stores increased from 67 at the end of 2020 to 94 as of September 15, 2021.
The company’s trailing revenue increased from $70.0 to $152.0 million, and its trailing adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improved from -$1.0 to $14.0 million. Its U.S. revenue run rate increased from $22.0 to $50.0 million. (Source: Ibid.)
High Tide Inc’s cash balance increased from $21.0 to $27.0 million. Its debt was cut by more than half from $72.0 to $28.0 million, with just $1.6 million of maturities in the next 12 months.
The company’s market cap increased from $112.0 to $514.0 million.
Also since the beginning of 2021, the price of High Tide stock went up from $3.83 to $9.38.
Strong Third Quarter
For the third quarter of fiscal 2021 ended July 31, High Tide announced that its revenue increased by 99% year-over-year from $24.1 to $48.1 million. (Source: “High Tide Reports Third Quarter 2021 Financial Results Featuring a 99% Increase in Revenue and Sixth Consecutive Quarter of Positive Adjusted EBITDA,” High Tide Inc, September 14, 2021.)
Geographically, $38.4 million of the company’s third-quarter revenue was earned in Canada, $9.6 million in the U.S., and an immaterial amount internationally. Its revenue from the U.S increased by 69% sequentially to $9.6 million.
High Tide Inc reported its sixth consecutive quarter of positive EBITDA. The company’s adjusted EBITDA in the third quarter of 2021 came in at $1.5 million, compared to $3.4 million in the same quarter last year.
The decrease in adjusted EBITDA was primarily due to expenses related to the uplisting of HITI stock to the Nasdaq.
The company’s gross profit in the 2021 third quarter increased by 75% year-over-year from $9.5 to $16.7 million. Its gross profit margin was 35%, versus 40% in the same quarter last year.
High Tide Inc ended the third fiscal quarter of 2021 with $26.6 million of cash on hand, compared to $7.5 million as of October 31, 2020.
Moreover, during the third quarter, High Tide Inc:
- Was added to three prominent exchange-traded funds (ETFs)
- Closed on an oversubscribed bought deal for gross proceeds of $23.2 million
- Eliminated all of its senior secured debt
- Announced its planned acquisition of leading online marijuana consumption accessory retailer DS Distribution Inc. (which does business as DankStop)
- Opened seven new retail locations in Canada
Since the end of the third quarter, High Tide Inc has:
- Completed the acquisition of 102 Saskatchewan, bolstering its retail presence in the Canadian prairie province of Saskatchewan
- Opened four new retail stores
- Completed the acquisition of DankStop
- Been added to the ETFMG Alternative Harvest ETF (NYSE:MJ), which is the world’s largest cannabis ETF
- Eliminated all of its convertible debentures that were issued by Meta Growth Corp.
- Entered two white-label partnerships with Heritage Cannabis Holdings and Loosh Inc.
- Finalized and revealed the store design for its new value outlets, “Cannabis Chop Club”
High Tide stock is one of the most interesting, compelling pot stocks. The company’s management says that, since its inception more than a decade ago, there has “never been a more opportunistic time for our company’s growth.” (Source: Ibid.)
Over the past year, High Tide Inc has been making strategic moves to advance its portfolio of companies, a move it believes it can continue to build on and capture a sizeable share of the global cannabis market.