By John Whitefoot, BA @ Profit Confidential
Wall Street Says High Tide Stock Could Soar 180%+
The lack of progress on legalizing cannabis at the federal level in the U.S. has sent once-high-flying pot stocks off a cliff. Many of those stocks deserved it and probably won’t recover. One marijuana stock that didn’t deserve it—and is currently in bargain-basement territory—is High Tide Inc (NASDAQ:HITI).
Like the broader cannabis stock market, HITI stock is deep in the red, down by 52% year-over-year. On the plus side, High Tide stock is up by 5.5% year-to-date. That’s not much, but it’s better than the S&P 500, which is down by 6.5% year-to-date.
Wall Street analysts expect HITI stock to make much bigger gains in the coming quarters. Of the analysts providing a 12-month share-price forecast for High Tide Inc, their average target is $9.12 and their high estimate is $12.69. This points to potential gains of 104% and 183%, respectively.
That’s not gospel, but it does show that High Tide stock is one of the most undervalued U.S. cannabis stocks out there.
Why the optimism?
High Tide Inc announced record financial results for its fiscal year 2021 and first quarter of its fiscal 2022. Moreover, its strong financials are expected to continue. Since the start of fiscal 2022 (November 1, 2021), High Tide has acquired Bud Room Inc. and NuLeaf Naturals, LLC. The company has also expanded its retail presence in Alberta, Ontario, and Saskatchewan.
High Tide Inc’s international revenue is expected to climb. Its U.K.- based subsidiary, Blessed CBD, entered the German market with online sales.
Chart courtesy of StockCharts.com
About HITI Stock
The Calgary, AB-based High Tide is a leading retail-focused cannabis company with operations in Canada, the U.S., and Europe.
By revenue, the company is the largest Canadian retailer of recreational pot. It has more than 105 locations in Ontario, Alberta, Manitoba, and Saskatchewan. The company also has additional locations under development. (Source: “High Tide Investor Presentation: March 2022” High Tide Inc, last accessed March 21, 2022.)
High Tide is North America’s first and only marijuana discount club retailer (think “Costco” for pot), operating under the banners “Canna Cabana,” “Meta Cannabis Co.,” and “Meta Cannabis Supply Co.”
High Tide Inc also owns some of the most popular marijuana consumption accessory e-commerce platforms in the world, including “Grasscity,” “Smoke Cartel,” “Daily High Club,” and “DankStop.”
The company also has a wholesale distribution division, Valiant Distribution, which includes the licensed entertainment product manufacturer Famous Brandz.
In early March, High Tide announced that its subsidiary Blessed CBD entered the German market with online sales of its cannabidiol (CBD) oils, gummies, capsules, creams, and balms. (Source: “High Tide Subsidiary Blessed CBD Enters German Market,” High Tide Inc, March 9, 2022.)
The German order fulfillment will be facilitated through High Tide’s Amsterdam-based warehouse.
Germany, which is the largest CBD market in Europe, is forecast to experience significantly increased demand for CBD products over the coming years. The country is expected to make up half of the E.U. cannabis market by 2024.
Record Financial Results
In its fiscal 2021 (ended October 31, 2021), High Tide’s revenue increased by 118% year-over-year to CA$181.1 million, with its revenue from outside Canada jumping from CA$11.0 to CA$80.0 million. (Source: “High Tide Announces Unaudited 2021 Financial Results,” High Tide Inc, January 27, 2022.)
Its fiscal 2021 gross profit increased by 108% year-over-year to CA$64.0 million and its adjusted earnings were a record CA$12.4 million.
For the first quarter of fiscal 2022 (ended January 31, 2022), High Tide Inc announced that its revenue grew by 88.5% year-over-year and 34% sequentially to CA$72.2 million. (Source: “High Tide Reports Q1 2022 Financial Results,” High Tide Inc, March 17, 2022.)
This represents the second-highest quarterly revenue ever reported by a Canadian marijuana company that reports in Canadian dollars.
In the first quarter of 2022, High Tide Inc’s gross profit went up by 56% year-over-year and 31% sequentially to CA$23.0 million.
Its adjusted earnings for the quarter were CA$3.0 million, compared to CA$4.6 million in the same quarter of the previous fiscal year. Sequentially, the company’s adjusted earnings climbed by 80%.
Canada accounted for the majority of High Tide Inc’s revenue (72.5%) in the first quarter, at CA$52.4 million. The U.S. segment accounted for CA$17.4 million and the international segment accounted for CA$2.3 million.
Year-over-year, the company’s first-quarter revenue increased by 53% in Canada, 346% in the U.S., and 1,016% internationally. Sequentially, the revenue increased by 22% in Canada, 65% in the U.S., and 455% internationally.
“This past quarter’s results, showcasing 34% sequential revenue growth and 80% sequential increase in Adjusted EBITDA, re-affirms our exponential, yet sustained growth trajectory,” said Raj Grover, High Tide Inc’s president and CEO. (Source: Ibid.)
The cannabis stock market sell-off has hurt many excellent pot stocks. One of the most unjustly punished marijuana stocks is High Tide stock.
Despite the challenging business environment, High Tide Inc has been reporting record financial results, launching new products, announcing acquisitions, growing its online presence, and expanding its international footprint.
And thanks to the success of its discount club model, the company expects its sales to keep increasing.
High Tide Inc’s wonderful financial performance, imminent entry into the Canadian province of BC, and ongoing expansion in Ontario should boost the value of HITI stock.