By John Whitefoot, BA @ Profit Confidential
Why Wall Street Says High Tide Stock Could Triple in Value
Stocks might be down significantly from their recent record levels, and investors might be fleeing the village, but there’s an undervalued cannabis stock that Wall Street analysts think investors should keep on their radar: High Tide Inc (NASDAQ:HITI).
Even though High Tide stock is down by 30% year-over-year, it’s one of the most compelling marijuana stocks out there.
In fiscal 2021, in addition to achieving excellent financial results, High Tide Inc:
- Acquired six new e-commerce platforms outside of Canada in the cannabidiol (CBD) and marijuana consumption accessory sectors
- Entered the U.K. market through a majority stake in Enigmaa Ltd. (operating as Blessed CBD)
- Grew its international customer base outside of Canada to more than 2.9 million
- Launched a discount club concept, “Cabana Club,” which has led to an increase in memberships from 65,000 on January 1, 2021 to more than 379,000 today
- Organically built and opened 48 new brick-and-mortar stores in Canada, bringing High Tide Inc’s total store count to 105
- Became first major cannabis retailer to trade shares on the Nasdaq
High Tide Inc has built upon that breakout year.
Since the start of its fiscal 2022 (November 1, 2021), the company has announced an at-the-market facility of up to CA$40.0 million for strategic initiatives, acquired Bud Room Inc. and NuLeaf Naturals, LLC, and expanded its retail presence in the provinces of Alberta, Ontario, and Saskatchewan.
For all that, investors have rewarded HITI stock with a significantly lower price. In fact, High Tide stock is trading at its lowest level since the start of 2021.
The stock’s outlook is exceptionally bullish. Of the analysts providing a 12-month share-price forecast for High Tide Inc, their average target is $10.50, with a high target of $12.55. This suggests potential upside of 145% or 200%, respectively.
Even their lowest price target of $6.86 suggests that HITI stock could advance 65% over the coming quarters.
Chart courtesy of StockCharts.com
About HITI Stock
Calgary, AB-based High Tide Inc is a leading retail-focused cannabis company with brick-and-mortar and e-commerce assets.
The company is the largest Canadian retailer of recreational cannabis as measured by revenue, with 106 current locations in Ontario, Alberta, Manitoba, and Saskatchewan. (Source: “Investor Presentation: January 2022,” High Tide Inc, last accessed February 1, 2022.)
Moreover, High Tide has North America’s first and only cannabis discount club (think “Costco” for pot), under the “Canna Cabana,” “Meta Cannabis Co.,” and “Meta Cannabis Supply Co.” banners. The company has additional discount club locations under development.
High Tide Inc has been serving its clients for more than a decade through its e-commerce platforms, including “Grasscity,” “Smoke Cartel,” “Daily High Club,” and “DankStop.” More recently, the company has gotten involved in the hemp-derived CBD e-commerce space through NuLeaf Naturals, Fab CBD, and Blessed CBD.
It also has a wholesale distribution division under Valiant Distribution, which includes the licensed entertainment product manufacturer Famous Brandz.
Acquisition of Bud Room Inc.
In early January, High Tide announced that it had entered a definitive agreement to acquire Bud Room Inc. for CA$3.6 million. (Source: “High Tide to Acquire Fastendr; Retail Kiosk and Smart Locker Technology Through Acquisition of Bud Room Inc,” High Tide Inc, January 5, 2022.)
The acquisition gives High Tide all rights to Bud Room’s customized “Fastendr” retail-kiosk and smart-locker technology and its retail cannabis stock in Ottawa, ON.
The Fastendr kiosks provide faster transaction times, increased average basket size, lower overhead, and lower labor costs. Owning the Fastendr technology is expected to improve High Tide Inc’s competitive advantage in brick-and-mortar cannabis retail.
All existing and future Canna Cabana locations will be equipped with Fastendr kiosks. High Tide Inc also expects to license the technology to third-party cannabis retailers in North America and expand into other retail sectors in North America and beyond.
Bud Room’s retail location in Ottawa has been generating annual run rates in excess of CA$2.4 million and adjusted interest, taxes, depreciation, and amortization (EBITDA) of CA$500,000.
Record 2021 Results
For its fiscal year ended October 31, 2021, High Tide announced that its revenue increased by 118% to CA$181.1 million. (Source: “High Tide Announces Unaudited 2021 Financial Results Featuring a 118% Increase in Revenue and Record Adjusted EBITDA of $12.4 Million,” High Tide Inc, January 27, 2022.)
The company’s revenue from Canada jumped by 120% to CA$150.5 million in fiscal 2021, while its revenue from the U.S. increased by 120% to CA$29.7 million. Its international revenues in fiscal 2021 advanced 45% to CA$900,000.
Its gross profit in fiscal 2021 increased by 108% to CA$64.0 million. High Tide Inc’s full-year adjusted EBITDA were a record CA$12.4 million.
In its fourth fiscal quarter, the company’s revenue climbed by 12% sequentially to CA$53.9 million.
Its gross profit in the fourth quarter increased by five percent sequentially to CA$17.6 million. The company’s adjusted EBITDA in the fourth quarter of fiscal 2021 were CA$1.6.
Keep in mind, High Tide Inc’s fourth quarter of 2021 only included 12 days of contributions from Blessed CBD and didn’t include any contributions from NuLeaf Naturals.
The company expects to report first-quarter 2022 revenue in excess of CA$70.0 million. That would be the third-highest quarterly revenue figure achieved by a Canadian cannabis company.
Most cannabis stocks deserve the sell-off that has been undermining the marijuana sector.
High Tide stock isn’t one of them. The company has expanded its Canadian and international footprint, grown its online retail business, made strategic acquisitions, launched an innovative discount club model, and strengthened its balance sheet.
Despite headwinds from the COVID-19 pandemic and inflation, for full-year 2021, High Tide Inc reported a huge revenue increase, reported record EBITDA, and increased its market share. High Tide has been achieving this huge growth while producing positive EBITDA for seven consecutive quarters.
Despite these successes, the best could be yet to come for High Tide stock.