Outlook for High Tide Inc Bullish on Raft of Positive News

The stock market sell-off has seen the valuations of most cannabis stocks tank. Some deserve it, but others don’t. One marijuana company that's been doing everything right and whose shares are trading at a serious discount is High Tide Inc (NASDAQ:HITI).

The company continues to report stellar financial results, open new stores, make strategic acquisitions, expand its international footprint, and significantly grow its discount club membership base.

Unfortunately, concerns about a recession, surging inflation, and rising interest rates are weighing down on investor sentiment. It doesn’t help that the Democrats, who currently own Washington, D.C., have failed to do anything with regards to federal marijuana legalization, even though it was a platform they stumped on in the runup to the 2020 election.

Despite all of the great things going on at High Tide Inc, HITI stock has taken a beating. As of this writing, High Tide stock is down by:

• 45% over the last three months
• 54% over the last six months
• 48% year-to-date
• 68% year-over-year

Suffice it to say, it’s been a miserable ride for HITI stockholders.

The stock market, however, will eventually bottom and rebound, and Wall Street analysts think that, when it does, High Tide stock will be one of the biggest winners in the industry.

Of the analysts providing a 12-month share-price target for High Tide Inc, their average estimate is $7.40 and their high estimate is $10.78, for potential gains in the range of 245% to 403%.

Currently trading at $2.14, HITI stock is 26% below its book value of $2.92 per share.

Chart courtesy of StockCharts.com

About High Tide Stock

High Tide Inc is a leading retail-focused cannabis company with operations in Canada, the U.S., and Europe. By revenue, the company is the largest Canadian retailer of recreational cannabis.

High Tide is North America’s first and only discount club marijuana retailer. It has 126 "Canna Cabana" discount club locations across Ontario, Alberta, BC, Manitoba, and Saskatchewan. (Source: “High Tide Investor Presentation: June 2022” High Tide Inc, last accessed July 18, 2022.)

In October 2021, High Tide Inc transitioned all of its Canna Cabana stores to a discount club concept with exclusive benefits for "Cabana Club" members. The company now has the largest corporately owned cannabis store network in Canada and the third largest in the world. The Cabana Club loyalty program currently has more than 550,000 members.

High Tide Inc also owns some of the most popular marijuana consumption accessory e-commerce platforms in the world: "Grasscity," "Smoke Cartel," "Daily High Club," and "DankStop."

The company is also home to some of the leading cannabidiol (CBD) brands in the U.S., U.K., and Germany.

On top of that, High Tide Inc’s wholesale segment designs, manufactures, and distributes proprietary and licensed consumption accessories. Its Valiant Distribution and Famous Brandz divisions offer more than 5,000 stock-keeping units (SKUs), including celebrity and studio licensed products.

Ninth Straight Quarter of Positive Adjusted EBITDA

On June 14, High Tide Inc reported its financial results for the second quarter of fiscal 2022 ended April 30.

The company announced that its revenue increased by 98% year-over-year and 12% sequentially to CA$81.0 million. This represents the second-highest quarterly revenue generated by a Canadian cannabis company that reports in Canadian dollars. (Source: “High Tide Reports Second Quarter 2022 Financial Results Featuring a 98% Increase in Revenue and Ninth Straight Quarter of Positive Adjusted EBITDA,” High Tide Inc, June 14, 2022.)

High Tide Inc earned CA$63.5 million of its 2022 second-quarter revenue in Canada, CA$15.9 million in the U.S., and CA$1.6 million internationally. Compared to the second quarter of 2021, the company's revenue was up by 81% in Canada, 181% in the U.S., and 864% internationally.

High Tide Inc's gross profit in the second quarter of 2022 increased by 51% year-over-year from CA$15.0 to CA$22.7 million.

The company's adjusted EBITDA in the second quarter of 2022 were CA$2.4 million, compared to $3.0 million in the first quarter. The decrease can be attributed to retail seasonality, since the first quarter included the holiday period.

High Tide Inc ended the second quarter of 2022 with CA$15.0 million in cash on hand.

Since reporting its second-quarter financial results, High Tide closed a short-term debt financing for CA$5.0 million. It also entered a $30.0-million credit facility. (Source: “High Tide Secures CAD$5 Million Subordinated Debt Financing to Power Continued Growth,” High Tide Inc, June 22, 2022.)

High Tide will use those funds to set up additional Canna Cabana locations in Canada, with a goal of reaching 150 locations by year-end.

Analyst Take

High Tide stock is an excellent, overlooked, and undervalued marijuana stock that could rise by more than 400% within a year.

High Tide Inc continues to report consistent and significant financial growth with each passing quarter, despite a persistently challenging macroeconomic environment.