By John Whitefoot, BA @ Profit Confidential
Why Wall Street says stocks at high tide could triple in value
Stocks could be down significantly from their recent record highs, and investors could flee the village, but there is one undervalued cannabis stock that Wall Street analysts think investors should keep on their radar: High tide inc. (NASDAQ: HITI).
I wrote about HITI stocks in Confidential profit since 2020, and now Wall Street analysts are finally waking up to the huge potential of this Canadian-based marijuana stock.
Even though High Tide’s stock is down 30% year over year, it is one of the most compelling marijuana stocks.
In fiscal 2021, in addition to achieving strong financial results, High Tide Inc:
- Acquisition of six new e-commerce platforms outside of Canada in the cannabidiol (CBD) and marijuana paraphernalia sectors
- Entry into the UK market through a majority stake in Enigmaa Ltd. (functioning as Blessed CBD)
- Increased its international customer base outside of Canada to over 2.9 million
- Launched a discount club concept, “Cabana Club”, which led to an increase in membership from 65,000 on January 1, 2021 to over 379,000 today
- Organic construction and opening of 48 new physical stores in Canada, bringing the total number of High Tide Inc stores to 105
- Became the first major cannabis retailer to trade shares on the Nasdaq
High Tide Inc built on this exceptional year.
Since the start of its 2022 fiscal year (November 1, 2021), the company announced a go-to-market facility of up to C$40.0 million for strategic initiatives, acquired Bud room inc. and NuLeaf Naturals, LLCand expanded its retail presence in the provinces of Alberta, Ontario and Saskatchewan.
For all this, investors rewarded HITI shares with a significantly lower price. In fact, High Tide stock is trading at its lowest level since the start of 2021.
The outlook for the stock is exceptionally bullish. Of the analysts providing a 12-month stock price forecast for High Tide Inc, their average target is $10.50, with a high target of $12.55. This suggests an upside potential of 145% or 200%, respectively.
Even their lowest price target of $6.86 suggests that HITI stock could rise 65% over the next few quarters.
Chart reproduced courtesy of StockCharts.com
About HITI Shares
High Tide Inc, based in Calgary, Alberta, is a leading retail-focused cannabis company with brick-and-mortar and e-commerce assets.
The company is Canada’s largest recreational cannabis retailer 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.)
Additionally, High Tide owns the first and only cannabis discount club in North America (think “Costco” for pot), under the name “Canna Cabana”, “Meta Cannabis Co.” and “Meta Cannabis Supply Co. banners. The company has other discount club locations under development.
High Tide Inc has been serving customers for over a decade through its e-commerce platforms including ‘Grasscity’, ‘Smoke Cartel’, ‘Daily High Club’ and ‘DankStop’. More recently, the company has become involved in the hemp-derived CBD e-commerce space through NuLeaf Naturals, Fabulous CBDand blessed CBD.
It also has a wholesale distribution division under Valiant castwhich includes the manufacturer of licensed entertainment products famous brandz.
Acquisition of Bud Room Inc..
In early January, High Tide announced that it had entered into a definitive agreement to acquire Bud Room Inc. for C$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 custom “Fastendr” retail kiosk and smart locker technology and its retail cannabis inventory in Ottawa, Ontario.
Fastendr kiosks offer faster transaction times, increased average cart size, lower overhead, and reduced labor costs. Possession of Fastendr technology is expected to improve High Tide Inc’s competitive advantage in physical cannabis retail.
All existing and future Canna Cabana locations will be outfitted with Fastendr kiosks. High Tide Inc also plans to license the technology to third-party cannabis retailers in North America and expand to other retail sectors in North America and beyond.
The Bud Room retail store in Ottawa has generated annual run rates of over C$2.4 million and adjusted interest, taxes, depreciation and amortization (EBITDA) of C$500,000.
Record results in 2021
For its fiscal year ended October 31, 2021, High Tide reported that its revenue increased 118% to C$181.1 million. (Source: “High Tide Announces Unaudited Financial Results for 2021 with 118% Increase in Revenue and Record Adjusted EBITDA of $12.4 Million”, High Tide Inc, January 27, 2022.)
The company’s revenue in Canada jumped 120% to C$150.5 million in fiscal 2021, while its U.S. revenue rose 120% to C$29.7 million. Canadian dollars. Its international revenue in fiscal 2021 grew 45% to CA$900,000.
Its gross profit in fiscal 2021 increased 108% to C$64.0 million. High Tide Inc’s adjusted EBITDA for the full year reached a record C$12.4 million.
In its fourth fiscal quarter, the company’s revenue increased 12% sequentially to C$53.9 million.
Its gross profit in the fourth quarter increased 5% sequentially to C$17.6 million. The company’s adjusted EBITDA in the fourth quarter of fiscal 2021 was C$1.6.
Keep in mind that High Tide Inc’s Q4 2021 only included 12 days of contributions from Blessed CBD and did not include any contributions from NuLeaf Naturals.
The company expects to report revenue in excess of C$70.0 million in the first quarter of 2022. This would be the third highest quarterly revenue achieved by a Canadian cannabis company.
Most cannabis stocks deserve the liquidation that has undermined the marijuana industry.
High Tide’s stock is not one of them. The company expanded its presence in Canada and internationally, grew its online retail business, made strategic acquisitions, launched an innovative discount club model and strengthened its balance sheet.
Despite the headwinds of the COVID-19 pandemic and inflation, for the full year 2021, High Tide Inc delivered a huge increase in revenue, record EBITDA and increased market share. High Tide has achieved this tremendous growth while producing positive EBITDA for seven consecutive quarters.
Despite these successes, the best may yet be yet to come for High Tide stocks.