Second Half of 2021 Looks Bullish for High Tide Stock
High Tide Inc (NASDAQ:HITI) has quietly been one of the best-performing pot stocks over the long term.
But, as the following list shows, over the near term, HITI stock leaves a little to be desired:
- +343% year-over-year
- +136% year-to-date
- -15% over the last three months
- -12% over the last month
Despite underperforming in the last three months, the second half of 2021 looks like it could be a growth period for High Tide stock.
The retail cannabis giant has been reporting record financial results, it uplisted to the Nasdaq in June, it’s opening new retail locations across Canada, and it closed an acquisition that cements High Tide Inc’s position as the leader in the U.S. e-commerce marketplace for marijuana consumption accessories.
Like many pot stocks, HITI stock has trended lower since the stock market sell-off in February.
On the one hand, High Tide stock needs to climb by 88% to get to its February high of $13.29. On the other hand, it has been trading in a tight range over the last three months but is trading at a tested support level near $7.00. That means HITI stock is trading in its most attractive range since the spring.
Even Wall Street agrees that High Tide stock could double from here. Of the analysts providing a 12-month price target for HITI stock, the average target is $16.05, with a high estimate of $16.85. That points to share-price growth of 127% or 138%, respectively.
But again, Wall Street is notoriously conservative in its forecasts. A 12-month share-price target for High Tide Inc of $19.25 is within reach. If the stock hits that price, it would represent a 172% increase from the current level.
Chart courtesy of StockCharts.com
HITI Stock Overview
High Tide operates a chain of 89 branded retail locations across Canada, giving it one of the largest brick-and-mortar marijuana presences in Canada. In fact, by revenue, High Tide owns the largest retail cannabis network in the country. (Source: “Investor Presentation: July 2021,” High Tide Inc, last accessed July 16, 2021.)
The company also has a stellar online presence. With the “Grasscity” and “Smoke Cartel” web sites, High Tide has the world’s two largest online stores for cannabis consumption accessories. More than 80% of the two sites’ revenue comes from the U.S.
High Tide Inc is also an online leader in U.S. cannabidiol (CBD) sales. “FAB CBD” is a leading online retailer of hemp-derived products in the U.S. and “CBDcity” is home to some of the best-rated CBD products in the U.S.
High Tide’s Wholesale segment designs, manufactures, and distributes proprietary and licensed marijuana consumption accessories. “Valiant Distribution” and “Famous Brandz” feature more than 5,000 stock-keeping units (SKUs), including celebrity and studio-licensed products.
On May 14, High Tide completed a 15:1 share consolidation and High Tide stock began trading on the Nasdaq in June.
High Tide Inc Continues to Expand in the U.S.
On July 6, High Tide closed on its previously announced acquisition of DHC Supply LLC, which operates as Daily High Club. With the addition of this company, High Tide now owns three of the five most popular e-commerce platforms for cannabis consumption accessories in the world. (Source: “High Tide Closes Acquisition of Daily High Club,” High Tide Inc, July 6, 2021.)
With more than one million marijuana consumption accessories sold, more than 15,000 subscribers, 800,000 “Instagram” followers, and more than 75,000 “TikTok” followers, Daily High Club is one of the leading online retailers of glass water pipes, vaporizers, and other pot consumption accessories.
The transaction is immediately accretive to High Tide Inc, with Daily High Club generating $9.4 million in net revenue and $1.2 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) during the 12 months ended April 2021.
Strong Q2 Results
For the second quarter of fiscal 2021 ended April 30, High Tide announced that its revenue jumped by 99% to $40.9 million. (Source: “High Tide Reports Second Quarter 2021 Financial Results Featuring a 99% Increase in Revenue and Another Record Adjusted EBITDA of $4.7 Million,” High Tide Inc, June 28, 2021.)
Its second-quarter 2021 financial results included revenue from the acquisition of META Growth Corp. in November 2020 and Smoke Cartel, Inc. in March 2021.
Geographically, $35.0 million of the second-quarter revenue was earned in Canada, $5.7 million in the U.S., and $200,000 internationally. Segment-wise, $38.4 million of the revenue was generated by Retail, $2.5 million by Wholesale, and an immaterial amount by Corporate.
The company’s gross profit increased by 93% to $15.0 million, with a gross profit margin of 37%, compared to 38% in the same prior-year period.
Its adjusted EBITDA for the three months ended April 30 was a record $4.7 million, a 161% improvement over the second-quarter 2020 adjusted EBITDA of $1.8 million.
High Tide Inc ended the second quarter with $29.4 million in cash, compared to $7.5 million at the end of October 2020.
“I am extremely proud of our results this quarter, especially given the macro backdrop we faced,” said Raj Grover, president and CEO. “Even during this difficult market environment, we continued to advance our bricks and mortar and online business.” (Source: Ibid.)
Plans & Outlook
High Tide Inc said it remains focused on expanding its footprint in Ontario, which is Canada’s most populous province. The company expects to increase its store count in Ontario from 18 today to 30 open stores by September 30. That’s the date on which the cap on the number of marijuana stores that any one company can own in Ontario is set to increase from 30 to 75.
Note that COVID-19-related restrictions in the second quarter limited High Tide’s stores in Ontario to deliveries only, which negatively impacted sales. On June 11, in-store shopping resumed in the company’s Ontario stores.
While it’s still early, High Tide Inc has seen a boost in its sales, which is consistent with its prior experience coming out of the previous two lockdowns in Ontario. The company also expects to enter the province of British Columbia in the coming months.
In addition to the continued expansion of its Canadian brick-and-mortar cannabis retail operations, the company expects to further grow its U.S.-focused businesses.
While recreational cannabis is not yet legal at the federal level in the U.S., High Tide is well positioned to enter the brick-and-mortar retail market in the U.S. when it’s federally permissible. Until then, the company has been taking advantage of the expanding ancillary hemp-derived CBD market and cannabis accessories market.
Note that the second-quarter results included only 37 days of contributions from Smoke Cartel, Inc. Since the end of the second quarter, High Tide Inc has closed its acquisition of FAB CBD and Daily High Club.
As mentioned earlier, by revenue, High Tide Inc has the largest retail cannabis network in Canada. It also owns three of the five most popular e-commerce platforms for marijuana consumption accessories in the world.
Over the last six months, the company has increased its retail footprint by 32% to 89 stores, its trailing revenue by 82% to $128.0 million, and its U.S. revenue run rate by 127% to $72.0 million.
High Tide Inc has also strengthened its balance sheet and cut its debt by more than half to $32.0 million. It also uplisted to the Nasdaq, which helped the company’s share price more than double and its market cap increase from $112.0 to $436.0 million.
That’s a busy six months, but the next six months could be just as transformational for HITI stock.