Shares from cannabis accessories manufacturer High Tide (HITI) have doubled in 2021 despite a significant pullback – like the majority of cannabis stocks – from the highs of the start of the year.
However, Echelon’s Andrew Semple expects the title to claw back those gains and some. The analyst reiterated a speculative buy rating on HITI along with a price target of CA$18.00 ($14.57). Investors could be sitting on returns of around 140%, if his thesis bears fruit over the next 12 months. (To see Semple’s record, Click here)
Semple’s latest endorsement follows two recent developments.
On Monday, the company revealed that it had entered into a credit agreement worth up to $25 million with ATB Financial. The facility consists of $10 million which will be available initially and, subject to certain conditions, an additional $15 million. The initial drawdown is expected before the end of the month, while the interest rate should be below 6% per annum. As such, Semple sees this as a “much cheaper cost of debt than what was available to High Tide previously.”
“We view this announcement positively,” the 5-star analyst added, “providing High Tide with additional funding to continue its M&A deal pipeline.”
Not that the company expects extra cash to pursue such opportunities. After 4 previous global e-commerce related acquisitions this year, the company announced on Tuesday that it has completed the purchase of Blessed CBD. High Tide has acquired an 80% stake in UK-based online retailer CBD for £9.06m (~C$15.5m). The company also has a 3-year option to buy the remaining 20% at 2.2x TTM earnings.
Blessed is one of the most popular direct-to-consumer CBD brands in the UK and had nearly 5 million visits to its website last year. The Company’s offerings include gummies, creams, oils and capsules.
Semple is even more enthusiastic about this latest move, calling it “a gem of an acquisition, and the right strategic and operational fit.” Even better, Semple considers the price paid “excellent”.
“We believe this is an exemplary transaction of the accretive M&A opportunities available in High Tide’s pipeline, with the Blessed CBD transaction valued at just 4.0x TTM EV/EBITDA,” summarized the enthusiastic analyst.
Overall, two other analysts recently tossed the hat with HITI’s reviews, and they’re both overwhelmingly positive, giving the stock a consensus Strong Buy rating. The average price target is also bullish; at C$17.12 ($13.86), the shares are expected to appreciate approximately 132% over the one-year period. (See HITI stock analysis on TipRanks)
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Disclaimer: Opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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