By John Whitefoot, BA @ Profit Confidential
Wall Street says stocks at high tide could soar 180%+
The lack of progress on federal cannabis legalization in the United States has sent once-high-flying marijuana stocks plummeting. Many of these stocks deserved it and are unlikely to recover. A marijuana stock that didn’t deserve it – and is currently in bargain territory – is High tide inc. (NASDAQ: HITI).
Like the broader cannabis stock market, HITI stock is deep in the red, down 52% year over year. On the positive side, High Tide stock is up 5.5% year-to-date. That’s not much, but it’s better than the S&P 500, which is down 6.5% year-to-date.
Wall Street analysts expect HITI stock to make much bigger gains in the coming quarters. Among the analysts providing a 12-month stock price forecast for High Tide Inc, their average target is $9.12 and their high estimate is $12.69. This indicates potential gains of 104% and 183%, respectively.
It’s not gospel, but it shows that High Tide’s stock is one of the most undervalued US cannabis stocks.
Why this optimism?
High Tide Inc announced record financial results for its fiscal 2021 and the first quarter of its fiscal 2022. In addition, its strong financials are expected to continue. Since the beginning 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 revenues are expected to increase. Its UK-based subsidiary, Blessed CBDentered the German market with online sales.
Chart reproduced courtesy of StockCharts.com
About HITI Shares
High Tide, based in Calgary, Alberta, is a leading retail-focused cannabis company with operations in Canada, the United States and Europe.
In terms of sales, the company is Canada’s largest retailer of recreational pot. It has over 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 discount marijuana 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 world’s most popular marijuana paraphernalia e-commerce platforms, including “Grasscity”, “Smoke Cartel”, “Daily High Club”, and “DankStop”.
The company also has a wholesale distribution division, Valiant castwhich includes the manufacturer of licensed entertainment products famous brandz.
In early March, High Tide announced that its subsidiary Blessed CBD had entered the German market with the online sale of its cannabidiol (CBD) oils, gummies, capsules, creams and balms. (Source: “High Tide Subsidiary Blessed CBD enters the German market”, High Tide Inc, March 9, 2022.)
Fulfillment of German orders will be facilitated by High Tide’s warehouse based in Amsterdam.
Germany, which is the largest CBD market in Europe, is expected to experience a significant increase in demand for CBD products over the next few years. The country is expected to account for half of the European cannabis market by 2024.
Record financial results
In its fiscal year 2021 (ended October 31, 2021), High Tide’s revenue increased 118% year-over-year to C$181.1 million, with revenue coming from outside the Canada from 11.0 to 80.0 million Canadian dollars. (Source: “High Tide Announces Unaudited 2021 Financial Results”, High Tide Inc, January 27, 2022.)
Its gross profit for fiscal 2021 increased 108% year-over-year to C$64.0 million and its adjusted profit reached a record C$12.4 million.
For the first quarter of fiscal 2022 (ended January 31, 2022), High Tide Inc reported that revenue increased 88.5% year over year and 34% sequentially for reach 72.2 million Canadian dollars. (Source: “High Tide Reports Q1 2022 Financial Results”, High Tide Inc, March 17, 2022.)
This is the second-highest quarterly revenue ever for a Canadian marijuana company reporting in Canadian dollars.
In the first quarter of 2022, High Tide Inc’s gross profit increased 56% year-over-year and 31% sequentially to C$23.0 million.
Its adjusted earnings for the quarter were C$3.0 million, compared to C$4.6 million in the same quarter last year. Sequentially, the company’s adjusted earnings climbed 80%.
Canada accounted for the majority of High Tide Inc’s revenue (72.5%) in the first quarter, at C$52.4 million. The US segment represented C$17.4 million and the international segment represented C$2.3 million.
Year-over-year, the company’s first-quarter revenue increased 53% in Canada, 346% in the United States and 1,016% internationally. Sequentially, revenues increased by 22% in Canada, 65% in the United States and 455% internationally.
“Last quarter results, showing sequential revenue growth of 34% and a sequential increase in Adjusted EBITDA of 80%, reaffirm our exponential, yet sustained, growth trajectory,” said Raj Grover, President and Chief management of High Tide Inc. (Source: ibid.)
The sell-off in the cannabis stock market hurt many great pot stocks. One of the most unjustly punished marijuana stocks is the High Tide stock.
Despite the challenging business environment, High Tide Inc posted record financial results, launched new products, announced acquisitions, increased its online presence and expanded its international footprint.
And thanks to the success of its discount club model, the company expects its sales to continue to grow.
The wonderful financial performance of High Tide Inc, its imminent entry into the Canadian province of British Columbia and its continued expansion into Ontario should boost the value of HITI’s shares.