High Tide Stock: Undervalued Pot Company Reports 10th Consecutive Quarter of Positive Adjusted EBITDA

Wall Street Thinks HITI Stock Can Rip 540% Higher

High Tide Inc (NASDAQ:HITI) is a great example of bad things happening to a good stock. High Tide is a leading retail-focused cannabis company with operations in Canada, the U.S., and Europe. Despite this, High Tide stock is down by 67% since the start of 2022 and down by 79% over the last 12 months.

What could justify this kind of sell-off? Nothing that’s been going on at High Tide Inc. The company continues to report excellent financial results, open new stores, make strategic acquisitions, expand its international footprint, and grow its customer base.

What has been dragging HITI stock lower is rising interest rates, soaring inflation, a looming recession, and politicians dragging their feet on federally legalizing marijuana.

These headwinds will eventually pass, and when they do, investors will wake up to the amazing long-term growth potential that Wall Street analysts have zeroed in on. Of the analysts providing a 12-month share price target for High Tide stock, their average estimate is $5.44 and their high estimate is $8.80, for potential gains in the range of 295% to 540%.

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As of this writing, HITI stock is trading at $1.38, which is 52% below its book value of $2.87. High Tide stock has been trading in a tight range since late July, with support at $1.38 and resistance at $1.43.

Chart courtesy of StockCharts.com

About High Tide Inc

By revenue, High Tide is the biggest Canadian retailer of recreational marijuana. It’s also North America’s first and only pot discount club retailer. (Source: “High Tide Reports Third Quarter 2022 Financial Results,” High Tide Inc, September 14, 2022.)

The company has 140 retail locations across Canada under its “Canna Cabana” and “Meta Cannabis” banners. In October 2021, High Tide transformed all of its Canna Cabana stores into discount club stores with exclusive benefits for members.

Membership in Cabana Club’s loyalty program currently stands at more than 750,000, which is more than 12% of the cannabis users across Canada (excluding the province of Quebec).

High Tide sells some of the most popular and leading cannabidiol (CBD) brands from the U.S., U.K., and Germany.

High Tide also owns the most popular marijuana consumption accessory e-commerce platforms in the world, including “Blessed CBD,” “Daily High Club,” “DankStop,” “Grasscity,” “NuLeaf Naturals,” and “Smoke Cartel.”

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

Another Quarter of Strong Revenue & Adjusted EBITDA Growth

On September 14, High Tide Inc announced that its revenue in the third quarter (ended July 31) increased by 98% year-over-year and 18% sequentially to $95.4 million. Its same-store sales went up by 46% year-over-year and 18% sequentially. (Source: Ibid.)

In the third quarter, the company’s revenues from Canada increased by 110% year-over-year to $80.7 million, its revenues from the U.S. went up by 33% to $12.7 million, and its international revenues soared by 1,486% to $1.9 million.

High Tide Inc’s current annual revenue run rate of more than $400.0 million puts it close to having the highest revenues of any cannabis company that reports in Canadian dollars.

High Tide Inc reported a third-quarter net loss of $2.7 million, compared to a third-quarter 2021 net loss of $1.7 million. Its gross profit in the 2022 third quarter increased by 54% year-over-year to $25.8 million, while its gross profit margin was 27%.

The company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the third quarter went up by 176% year-over-year and 77% sequentially to $4.2 million, representing its 10th consecutive quarter of positive adjusted EBITDA.

During the third quarter, the company’s Cabana Club loyalty program surpassed 750,000 members, with more than 90% of its daily transactions conducted by club members. Also during the quarter, High Tide:

  • Opened five new Canna Cabana locations
  • Completed its acquisition of a 100% equity interest in Livonit Foods Inc. (operating as Bud Heaven)
  • Launched its “Cabana Cannabis Co.” line of house-branded products in Saskatchewan, with anticipated launches in Ontario and Manitoba by the end of 2022
  • Announced its acquisition of nine stores from Choom Holdings Inc (CNSX:CHOO, OTCMKTS:CHOOF)
  • Launched, via its subsidiary Enigmaa Ltd. (operating as Blessed CBD), sales of hemp-derived CBD products on Amazon.com, Inc.’s (NASDAQ:AMZN) U.K. platform

Analyst Take

Undervalued and overlooked High Tide Inc has the largest corporately owned cannabis store network in Canada and the third-largest in the world.

The company continues to report wonderful financial results, which in the second quarter included enormous year-over-year increases in revenue and adjusted EBITDA. The company’s impressive numbers came despite a competitive marijuana retail market and numerous macroeconomic headwinds.

As such, HITI stock could be set to rise in value.