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A Rising Tide Will Lift All Boats...and Blast This One to the Moon 01/17/2021 Stonks Rising by byu/raw_salmon and Penniless Reddit High Tide Inc ($HITIF/$HITI) - A Rising Tide Will Lift All Boats...and Blast This One to the Moon ???????????????????????? DD It's not every day you find a promising penny stock before it pops, and if you've been looking for one then you're gonna want to read this. I've been wanting to write a definitive DD post for this stock for a while but haven't had the time until now. There's been a few good posts about it but none have gotten the attention they deserve. A month ago, I learned about HITIF from a Reddit thread, thought it was too good to be true, spent 2 full days of research trying to find something wrong with it...and couldn't. This penny stock is already incredibly undervalued based on current fundamentals without even considering its future growth plans. This isn't speculative; HITIF popping to the $2-5+ range is a matter of when, not if. If you don't believe me, read below. All dollar figures are in USD Date: Jan 18, 2021 Current Share Price: $0.21 Market Cap: $95.5 Million Number of Shares: 449,400,000 Shares (JohnCM note: If HT is at $0.40 at time of unlisting to NASDAQ, a reasonable reverse split would be 1 for 12 resulting in $4.80 per share and 37,500,000 million shares outstanding). What is High Tide Inc.? High Tide Inc. is a manufacturer, distributor, and retailer of cannabis products and accessories based out of Canada. HITIF prides itself with being the "One Stop Shop of Cannabis" in Canada, with an unmatched store inventory selection and over a decade of experience in the industry. Okay, so what? Why should I care about this stock? I got tons of excellent reasons why, and most of them are based on current fundamentals instead of speculation: HITIF is massively undervalued, has amazing financials/balance sheet, and an all-but-guaranteed future of exponential growth. HITIF is currently the LARGEST single cannabis retailer in Canada in terms of revenue, with 23% of its revenue from the US.(JohnCM note: Trying to find the business revenue that is taking place in the U.S.). HITIF just turned a profit in Q3 2020, with a $3.36M net income and 180% increase in revenue year-over-year. (JohnCM note: I'll have to take another look at the quarterly. Hard to believe that they were actually net positive in earnings). HITIF recently acquired Meta Growth Corp., almost doubling its store count from 37 stores to 67 stores (This hasn't even been reflected in an earnings report yet). Post-merger, HITIF earned $117M in revenue ttm with its CURRENT assets (Q3 2020 annualized with Meta Growth numbers included). This $117M revenue estimate brings its P/S ratio to 0.82, which is exceptional and a strong indicator that this stock is undervalued. HITIF will almost double its current store count from 67 stores to 115 stores by the end of 2021. The majority of these new stores will be in Ontario, which is Canada's largest cannabis market and has been mostly untapped by HITIF so far. HITIF has strong vertical integration (design, manufacturing, distribution, and retail) and a 41% gross margin. HITIF has secured several licensing deals for its accessories (Snoop Dogg, Trailer Park Boys, Kevin Smith, Guns N' Roses, etc.). HITIF has great management that has proven it can execute and has consistently reduced operating expenses vs gross revenues year after year, thus maximizing profit. This proven track record of profit optimization will undoubtedly encompass their newly-acquired Meta Growth assets and upcoming 2021 stores. Their CEO Raj Grover has even done a Reddit AMA. HITIF will focus on expansion in the US after it's done with the Ontario market, and the industry as a whole will benefit from a presidency, house, and senate that is controlled by Democrats. With 23% of their revenue already coming from the US, HITIF should have little difficulty expanding their US operations further after legalization increases. Aphria and Aurora Cannabis are invested in HITIF. HITIF is the first in its sector to apply for the NASDAQ and will likely get uplisted, which will bring in institutional investors and skyrocket this thing. Some are concerned that HITIF doing a reverse split to get uplisted to the NASDAQ will hurt the share price. Here's my counterargument: HITIF is now profitable. They have a sustainable balance sheet that will only continue to improve. Though some retail investors will get scared and sell, this will be nothing compared to the amount of buying from larger investors once it gets more visibility from the uplisting. A small dip from a reverse split is possible but will quickly get overshadowed by the whales. I'm not concerned about this as the pros far outweigh any cons. Most companies that reverse split do it to stay in the NASDAQ because of poor financials. HITIF is the opposite of that. The uplisting is GOOD. (JohnCM note: It is true that reverse splits are usually bad news, but if the company is in good shape, and this gets them to the NASDAQ, if can be a good thing. And resulting in a low O/S number). Don't just take it from me. Here's an investment firm saying that HITIF has the best balance sheet in the Canadian cannabis retail sector: https://www.bnnbloomberg.ca/video/bruce-campbell-discusses-high-tide-inc~1899753 Bullish article from Seeking Alpha (this economist/mathematician has price targets up to $4.80): https://seekingalpha.com/article/4396195-high-tide-is-blazing-trail-and-is-why-you-should-buy I'm currently holding 107,000 shares and will continue to buy more. (JohnCM note: 100,000 shares here). TLDR: Buy and hold HITIF because it will ????????????????????????????????????????????????????????
yeah i know im not going to start letting any go till we hit $1
yeah the longer the ramp and explosion takes the higher this goes overall when this gets noticed
i don’t mind this stair stepping climb
reminds me of those big companies in the early days that kept a slow steady climb
wow someone wanted those shares early and happy to pay higher
maybe we open at .40 hmmm
according to that video the ceo was in posted last week
he didn’t mention details but said there are a few more steps till they get approval but it’s in the works and they are following the process
if they have to do a small reverse split to meet the requirement i don’t look at it as bad because the exposure to larger investors out ways any negative
yeah i see this riding to $1 as well
very reluctant to sell any before then
even if it dips a bit on the climb up.
2-3 steps forward 1 step back is what this has been doing prior to this week.
there are still major catalysts pending that will give this some boosts
earnings just around the corner big
uplist to NASDAQ bigger
legalization of pot on federal level huge
i added more $ friday and had a bid in for 20k for .205 half the day and it didn’t get filled.
Then come this past tuesday there’s no way to get .20s anymore lol
i picked up 5k more for .30 to make my total position 125k
i want more but hate raising my average price so much and kicking myself i didn’t get more when it was .20
i wanted a 150k total position, almost there
What's Happening With High Tide Inc Stock Today?
High Tide Inc (HITIF) stock is trading at $0.29 as of 10:47 AM on Tuesday, Jan 19, an increase of $0.07, or 34.82% from the previous closing price of $0.21. The stock has traded between $0.27 and $0.33 so far today. Volume today is more active than usual. So far 2,556,046 shares have traded compared to the average volume of 810,528 shares.
What's Happening With High Tide Inc Stock Today?
High Tide Inc (HITIF) stock is trading at $0.29 as of 10:47 AM on Tuesday, Jan 19, an increase of $0.07, or 34.82% from the previous closing price of $0.21. The stock has traded between $0.27 and $0.33 so far today. Volume today is more active than usual. So far 2,556,046 shares have traded compared to the average volume of 810,528 shares.
What's Happening With High Tide Inc Stock Today?
High Tide Inc (HITIF) stock is trading at $0.29 as of 10:47 AM on Tuesday, Jan 19, an increase of $0.07, or 34.82% from the previous closing price of $0.21. The stock has traded between $0.27 and $0.33 so far today. Volume today is more active than usual. So far 2,556,046 shares have traded compared to the average volume of 810,528 shares.
Very good advice on possible forecasts
thank you
yeah maybe something about to come out in news was leaked out to a few and has the few that know preloaded up.
Guess we will find out soon.
ahh yeah good point
so what ever gain we close out at today it really is -20% cause that part is from yesterday
But the mystery of why continues
i been looking all over the web for some
new news and only found that one article i just posted but doesn’t state anything about why the increase, it only mentions the increase
then why we up so much today?
i don’t see any new news
wow!!! what happened?
LOL this scam still going?
sheesh i am so glad i got out of this with a minimal loss
moved on to the best penny stock out here now high tide!
zip code changer with new cannibis laws changing in USA
trading at .20 within 1 year will be over $1
uploading to big boards this year too
LOL breaking right through that 600k block from INTL.. had a feeling it wouldn’t hold up long .. damn i wish i could get funds in my account fast enough to grab some of that .205 before they are all gone, ugh
I think earnings is going to be really good
seen this before
the ole familiar push down hard before earnings pop
Wow INTL
with a 600k sell on ask
they don’t want this going anywhere right now
keeping it right at .20 just where they want it for now
Same
i can tell you i was not happy with today’s performance at all!
especially when everyone else was green big time.
But can’t loook at the daily picture and have to look at the big picture
have a feeling it will recover some of that loss from today with tomorrow’s trading
today was for a sure a step back day
with earnings right around the corner im sure there are market manipulators trying to push it down to accumulate for the bounce at earnings.
it is fired up already lol this is going to be one of those slow 2 step forward one step back climbs to $1
buy and forget is the way to go for sure
yeah but that was a single market maker trade
not i real trade i think
looks like a single trade on the chart
Maybe this is a push and hold down play to accumulate more before the earnings release?
Is that coming out this month?
well to be fare we are coming off a huge jump and we broke the .20 threshold and holding it well
just have to wait out the profit takers same as we did before the new year waiting out the end of year sellers
once they are done next stop is .25 cents
this is has been a slow and steady uptrend since i got in
2 or 3 steps forward then one step back
Hopefully they settle soon
at this rate we will be .25 cents by the end of this week!
this is the not so long road to $1
Happy New Year!
Hope to see this at $1 sometime this year with out the RS.
that would make my year!
Holding those gains nicely!
End of year selling
Mostly Red day for the cannabis sector so far today and HiGH Tide is holding up well!
I thought i would never say this but INTL is worse then OTCX with this stock lol
relentless to put up fake sell walls to try and keep it from breaking out.
No biggy that wall gets chipped away little by little snd notice how when it gets hit too much they pull back
it’s not a true retail sell order they did this back below .20 too
Yeah this is great
it’s on a absolute uptrend with what looks like $1 as the goal
No way i can let even 1 share go
why anyone would sell at .20 when on such a uptrend and still way undervalued
my fear would be is selling some at .20 then yeah it may dip to .18 or 19 on a red day but then shoot up to .22 the next then repeat 3 steps forward 1 step back
not enough back peddle to sell and buy back
This is a absolute for sure long play.
i will wait for $1 to let go of few nights way before that.
only regret is wishing i had more funds to buy more then i have when it was back at .13 .. but holding my 120k shares tightly
oh yeah forgot about end of the year selling
well that was a good day to do it and held up really well on a overall red day
yeah held up very well considering how red everything was today
yes for sure!
i been spreading the word as well
INVESTOR PRESENTATION
https://hightideinc.com/wp-content/uploads/2020/11/High-Tide-Investor-Presentation-2020-11-03.pdf
Stock Symbols: CSE:HITI | OTC:HITIF | FRA:2LY
Share Price: $0.17
Average Daily Volume: 786,394
Share Outstanding (basic) 240 million
Market Capitalization: $41 million
Total Employees: 343
TTM Revenue: $67.84 million
TTM Gross Profit: $25.51 million
Total Assets: $75.87 million
High Tide is a retail-focused cannabis corporation enhanced by the manufacturing and distribution of cannabis lifestyle accessories:
Over 10 years focused on the cannabis consumer
• 341 Canna Cabana branded retail cannabis stores
• 31 KushBar retail cannabis store now open
• Grasscity.com – world’s best online headshop
• CBDcity.com – CBD e-shop, launched May 2020
Designs, manufactures and distributes proprietary smoking accessories and cannabis lifestyle products
• Valiant Distribution with over 5,000 SKUs featuring nine celebrity licenses
1 As at November 2, 2020. 2 Total from all three exchanges as at November 2, 2020. 3 As at November 3, 2020 including all direct retail staff. 4 For the trailing 12-month period ending July 31, 2020. 5 As at July 31, 2020, per 3Q20 unaudited financials.
HIGH TIDE IS BLAZING A TRAIL AND HERE IS WHY YOU SHOULD BUY
High Tide Articles
Seeking Alpha
By D. H. Taylor
December 26, 2020
https://seekingalpha.com/article/4396195-high-tide-is-blazing-trail-and-is-why-you-should-buy
Printed profitable per share for first time.
Doubling store count and revenue with recent acquisition, and this will likely double earnings in the very near future.
Stated goal of doubling store count after acquisition over period of time and will continue to increase shareholder value.
Stock price is significantly undervalued.
The beauty of the cannabis industry is that it is still fairly new while at the same time stocks are near all-time lows. When I analyze a company, there are a couple of variables that I look for in a cannabis industry participant. First, I take a broad look at the cannabis industry to see what the overall trends are. In Canada, cannabis is increasing every month more and more.
Then I look at a company’s respective earnings. Since Canadian cannabis sales continue to rise, my expectation is that a company doing business up in Canada should have rising earnings. Next are costs; gross costs and operating costs. I want to see if management is focused on the basics. Earnings are next. Given this environment where we are seeing rising retail sales month after month, if costs are kept down, can a company achieve profitability. The final piece of the puzzle is how much the stock is trading at versus where I think it is trading. As I said, cannabis stocks are near lows since they’ve been beaten down so much. That is an opportunity, as far as I am concerned.
When I looked at the data and charts on High Tide (OTCQB:HITIF), for all of the right reasons, it was love at first sight. Here is a breakdown of this Canadian company and why I think it is going to be a great company for a long time.
High Tide is a retailer and producer of cannabis with several strong brands and is even partnered with Snoop. High Tide is in the process of acquiring Meta Growth (OTCPK:NACNF) which overwhelmingly voted to be picked up by the larger company. The combination of the two will create the biggest cannabis retailer in Canada with 63 stores and plans to double that over the course of the next year. That is a very valuable place to be in with a budding industry.
It should be noted that High Tide has prominent investors in its own operations from both Aurora Cannabis (NYSE:ACB) and Aphria (NASDAQ:APHA); the latter of which is being merged with Tliray (NASDAQ:TLRY). High Tide is also on its way to NASDAQ, which will increase its credibility as well as liquidity.
As the fundamentals show, there are a lot of positive aspects of the company. But first, let’s check out the new data coming out of Canada.
CANNABIS IN CANADA
One of the things that I always keep an eye on is the cannabis industry’s overall sales numbers. As it turns out, Canadians are purchasing more and more and more cannabis. The recent data was just released and the 12-month increase is well over double, moving from $125M in October 2019 to $270M today, ~110% increase YoY:
There are 25 data points. Five of them are downward on a MoM basis; the rest have moved upwards. Keep in mind, the YoY is during a global pandemic so the increase is a bit more meritorious. One of the reasons is that cannabis in Canada is legal on the federal level. Because of that, a person can purchase their products and have them delivered to their door through the mail.
I do not see the rate of growth abating too much anytime soon. Continuously, I see the number of dispensaries opening increasing. Access to dispensaries is a strong indicator of sales. So, as the numbers increase for dispensaries, Canadian retail sales of cannabis increases.
REVENUE
As I mentioned, once you’ve looked at the overall industry, the next box to check would be the increasing revenues box. Keep in mind, High Tide is putting together the country’s largest network of retail dispensaries which is key to sales. Here is the result of the continued increases in dispensaries that High Tide has already put in its portfolio:
YoY, High Tide went from $6.2M to $16.2M, a nearly 200% increase in revenues. After checking with SEDAR, Meta Growth has reported revenues of ~$12M over the summer, so we can expect that this number will increase by almost double once the company reports combined earnings.
Right from the start, looking at the data for what the combined company can print, it is an upwardly increasing revenue stream. Granted, I believe there will be some point where the revenue starts to level off, or at the very least tapering its growth rate. But I do not see the current growth rate abating any time soon.
GROSS MARGINS AND OPERATIONAL EFFICIENCIES
I am a big stickler when it comes to management keeping costs in line. But, with cannabis companies, since they are all still relatively new, costs tend to be all over the map with the companies I’ve looked at. But, as I mentioned earlier, this company checks all of my boxes, and here are gross margins to show what I am talking about:
Consistency is one of the variables you are looking for so that management knows what it is working with. These numbers are highly consistent. This helps with management’s decisions because it generally knows where costs are going to come in. At the same time, High Tide has a large retail presence. Margins from products at a retail establishment are fairly consistent.
Operating efficiencies are another important indicator and High Tide is moving in the correct direction:
If gross margins are 41.3% and operating expenses are coming in at 31.1%, then management has a solid chance at profitability. Should the operating efficiencies improve from here, then earnings will do the same. The downward slide is impressive in the sense that it is persistent.
The combination of the two future companies merged together may improve margins even more, which will be an even larger benefit than where the company stands at this point. Keep in mind, when you merge two retail companies, you can then offer different products at an existing store and thereby improve the potential revenue on a same-store basis.
NET INCOME
As I had previously mentioned, net incomes were positive. With gross margins remaining consistent and operating efficiencies continually declining, it seemed to be a matter of when the company would print positive net income:
Now that the company has printed positive earnings, and with an even bigger revenue base to work with, we can start valuing this company on a future earnings potential.
However, I do want to point out that the SEDAR information I found on Meta Growth shows the past-three month earnings to be a loss of -C$23M for the quarter whereas High Tide printed a profit of C$4M. This will be the next step for the combined company to get to that point where there is a joint profit. Having the biggest cannabis retail presence in Canada is a great statistic to brag about. But, if it does not earn a profit, what good is it.
Having said that, High Tide has proven what management is capable of accomplishing. It certainly has a strong mix of brands to offer customers who are continuously shopping at its stores or High Tide would not have been able to print a profit. That is the template that I believe will be used to work with the new mix of stores. Because of this, I believe that getting the combined companies to profitability will be a lot quicker than what High Tide already accomplished alone.
While this may keep the stock price at bay, it is just a matter of time until I believe the stock will begin an appreciable rise upwards.
EQUITY AND BOOK VALUE
What is a company worth? There are two places to look for a company’s valuation when you want to know what they are worth. Value investors most certainly look at book value to see what assets the company has built up. Here are High Tide’s total assets:
One of management’s jobs is to continually increase value in a company. And this is what a value investor is looking for. I am a value investor at my core. This chart is continually rising and so that is a good thing. But there are two sides to the equation and liabilities are on the other side.
Just as assets have been increasing, so have liabilities:
This is by no means a bad thing. In order to create an omelet, you have to crack some eggs. And taking on debt is part of the process of building a business. This difference is about $10M and this is moving higher.
I use these metrics for two reasons. First, it establishes the basis for “what is my worst-case scenario?” If things go south by a long shot if the company were to be liquidated, what would there be? This concept of book value and assets helps to establish that metric, but it is by no means a panacea. But it allows me to look at a company and see if there is value there that the stock market is not pricing in.
Book value per share is a function of total assets, and you can see the book value here:
As it turns out, it is low compared to the stock price. So, you need to consider the forward earnings as well in the equation with valuing High Tide… up to a certain point. Let me explain.
First, forward earnings, should they be consistent with the numbers right here at $0.01 per share, with no increases in earnings – more on that in a moment – then High Tide would earn $0.04 per share. With 30x earnings multiple, that puts the company’s stock potential at $1.20. Nice. But wait.
High Tide is also taking on a losing company. True, revenues will nearly double. To me, that is huge. If you have two stores in different parts of a city, they each sell about the same amount of product but one is profitable and the other is not, bringing in the new management from the profitable company to teach the other unprofitable company how to be profitable should not be the world’s tallest mountain to climb. That to me is the opportunity.
So, High Tide is taking on a company that would significantly alter any future valuation models. I am not interested in getting into a stock that might be priced too high, but with this, there is still room. But, if you visualize forward, you can see a lot of potential.
I believe that the stock, albeit higher than book value, is still significantly below the future earnings multiples traditionally applied to growth stocks.
HITIF STOCK
HITIF stock may be above book value, but it is well below where it could be when you consider future earnings multiples:
I find this time and time again in the cannabis industry. And I can’t tell you how much I love to find stocks that are below value. Again, given the current multiples on future earnings, HITIF would be about $1.20 per share, and that is easy mathematics. But, as I mentioned, it is taking on a company that will bring this valuation back down, and this would devalue the stock.
But then you start to consider the new valuation of the company. Given revenues that will immediately double on a per quarter basis, and given the company wants to double the number of stores, wouldn’t the stock’s valuation be multiples higher given these variables?
WHERE WILL HIGH TIDE BE IN ONE YEAR’S TIME?
High Tide has just become a profitable company with $0.01 per share revenue. I believe that number would continue higher after a year’s time. But we do not need to speculate on that just yet. Earnings and future valuation would put the company’s stock at $1.20 per share today.
Then, High Tide is going to double its revenues with the recent acquisition of Meta Growth. Given the success that High Tide has had with its own retails stores, I believe that the newly acquired retail stores will see the same earnings. Given that, the future multiple pushes the stock upwards to $2.40 per share.
But the stated goal is for High Tide and Meta Growth to also double their own store count over the next couple of years. That is a huge leap forward for the combined companies. Nonetheless, I am looking at what management is doing with its costs and I believe it is well disciplined and mindful of its responsibility to provide value. So, I believe that if they were to open a new store up this discipline and mindfulness would be employed in a structured manner with any new store opening.
Given this potential, when the store count does reach the 113 level it has declared, that would put the per-share earnings at about $0.04. With 30x earnings multiple, this puts the stock at $4.80 per share in a period of time that it would take to get these new stores to profitability.
THE TAKEAWAY: IS HIGH TIDE A GOOD BUY?
It is going to take time and investment for High Tide to be able to hit its numbers for opening new stores. The pace it has declared is blistering and I have a tough time believing it can be done prudently. But prudence is the one thing High Tide has demonstrated it is committed to. Still, convincing the neighborhood to consistently shop at a new store takes time, no matter how good management is. I think High Tide will get to its stated goal of profitability with the newly merged company and that should occur in one year’s time. I also believe that it will open significantly more stores as it is projecting to do, and these new stores will likely be profitable in some period of time, but I do not believe that is possible within one year’s time.
Given that, I believe that this company will be a big winner at some point in a couple of year’s time. I am willing to be very patient in my outlook as to when these goals are achieved.
I am very bullish on High Tide.
HIGH TIDE IS BLAZING A TRAIL AND HERE IS WHY YOU SHOULD BUY
High Tide Articles
Seeking Alpha
By D. H. Taylor
December 26, 2020
Printed profitable per share for first time.
Doubling store count and revenue with recent acquisition, and this will likely double earnings in the very near future.
Stated goal of doubling store count after acquisition over period of time and will continue to increase shareholder value.
Stock price is significantly undervalued.
The beauty of the cannabis industry is that it is still fairly new while at the same time stocks are near all-time lows. When I analyze a company, there are a couple of variables that I look for in a cannabis industry participant. First, I take a broad look at the cannabis industry to see what the overall trends are. In Canada, cannabis is increasing every month more and more.
Then I look at a company’s respective earnings. Since Canadian cannabis sales continue to rise, my expectation is that a company doing business up in Canada should have rising earnings. Next are costs; gross costs and operating costs. I want to see if management is focused on the basics. Earnings are next. Given this environment where we are seeing rising retail sales month after month, if costs are kept down, can a company achieve profitability. The final piece of the puzzle is how much the stock is trading at versus where I think it is trading. As I said, cannabis stocks are near lows since they’ve been beaten down so much. That is an opportunity, as far as I am concerned.
When I looked at the data and charts on High Tide (OTCQB:HITIF), for all of the right reasons, it was love at first sight. Here is a breakdown of this Canadian company and why I think it is going to be a great company for a long time.
High Tide is a retailer and producer of cannabis with several strong brands and is even partnered with Snoop. High Tide is in the process of acquiring Meta Growth (OTCPK:NACNF) which overwhelmingly voted to be picked up by the larger company. The combination of the two will create the biggest cannabis retailer in Canada with 63 stores and plans to double that over the course of the next year. That is a very valuable place to be in with a budding industry.
It should be noted that High Tide has prominent investors in its own operations from both Aurora Cannabis (NYSE:ACB) and Aphria (NASDAQ:APHA); the latter of which is being merged with Tliray (NASDAQ:TLRY). High Tide is also on its way to NASDAQ, which will increase its credibility as well as liquidity.
As the fundamentals show, there are a lot of positive aspects of the company. But first, let’s check out the new data coming out of Canada.
CANNABIS IN CANADA
One of the things that I always keep an eye on is the cannabis industry’s overall sales numbers. As it turns out, Canadians are purchasing more and more and more cannabis. The recent data was just released and the 12-month increase is well over double, moving from $125M in October 2019 to $270M today, ~110% increase YoY:
There are 25 data points. Five of them are downward on a MoM basis; the rest have moved upwards. Keep in mind, the YoY is during a global pandemic so the increase is a bit more meritorious. One of the reasons is that cannabis in Canada is legal on the federal level. Because of that, a person can purchase their products and have them delivered to their door through the mail.
I do not see the rate of growth abating too much anytime soon. Continuously, I see the number of dispensaries opening increasing. Access to dispensaries is a strong indicator of sales. So, as the numbers increase for dispensaries, Canadian retail sales of cannabis increases.
REVENUE
As I mentioned, once you’ve looked at the overall industry, the next box to check would be the increasing revenues box. Keep in mind, High Tide is putting together the country’s largest network of retail dispensaries which is key to sales. Here is the result of the continued increases in dispensaries that High Tide has already put in its portfolio:
YoY, High Tide went from $6.2M to $16.2M, a nearly 200% increase in revenues. After checking with SEDAR, Meta Growth has reported revenues of ~$12M over the summer, so we can expect that this number will increase by almost double once the company reports combined earnings.
Right from the start, looking at the data for what the combined company can print, it is an upwardly increasing revenue stream. Granted, I believe there will be some point where the revenue starts to level off, or at the very least tapering its growth rate. But I do not see the current growth rate abating any time soon.
GROSS MARGINS AND OPERATIONAL EFFICIENCIES
I am a big stickler when it comes to management keeping costs in line. But, with cannabis companies, since they are all still relatively new, costs tend to be all over the map with the companies I’ve looked at. But, as I mentioned earlier, this company checks all of my boxes, and here are gross margins to show what I am talking about:
Consistency is one of the variables you are looking for so that management knows what it is working with. These numbers are highly consistent. This helps with management’s decisions because it generally knows where costs are going to come in. At the same time, High Tide has a large retail presence. Margins from products at a retail establishment are fairly consistent.
Operating efficiencies are another important indicator and High Tide is moving in the correct direction:
If gross margins are 41.3% and operating expenses are coming in at 31.1%, then management has a solid chance at profitability. Should the operating efficiencies improve from here, then earnings will do the same. The downward slide is impressive in the sense that it is persistent.
The combination of the two future companies merged together may improve margins even more, which will be an even larger benefit than where the company stands at this point. Keep in mind, when you merge two retail companies, you can then offer different products at an existing store and thereby improve the potential revenue on a same-store basis.
NET INCOME
As I had previously mentioned, net incomes were positive. With gross margins remaining consistent and operating efficiencies continually declining, it seemed to be a matter of when the company would print positive net income:
Now that the company has printed positive earnings, and with an even bigger revenue base to work with, we can start valuing this company on a future earnings potential.
However, I do want to point out that the SEDAR information I found on Meta Growth shows the past-three month earnings to be a loss of -C$23M for the quarter whereas High Tide printed a profit of C$4M. This will be the next step for the combined company to get to that point where there is a joint profit. Having the biggest cannabis retail presence in Canada is a great statistic to brag about. But, if it does not earn a profit, what good is it.
Having said that, High Tide has proven what management is capable of accomplishing. It certainly has a strong mix of brands to offer customers who are continuously shopping at its stores or High Tide would not have been able to print a profit. That is the template that I believe will be used to work with the new mix of stores. Because of this, I believe that getting the combined companies to profitability will be a lot quicker than what High Tide already accomplished alone.
While this may keep the stock price at bay, it is just a matter of time until I believe the stock will begin an appreciable rise upwards.
EQUITY AND BOOK VALUE
What is a company worth? There are two places to look for a company’s valuation when you want to know what they are worth. Value investors most certainly look at book value to see what assets the company has built up. Here are High Tide’s total assets:
One of management’s jobs is to continually increase value in a company. And this is what a value investor is looking for. I am a value investor at my core. This chart is continually rising and so that is a good thing. But there are two sides to the equation and liabilities are on the other side.
Just as assets have been increasing, so have liabilities:
This is by no means a bad thing. In order to create an omelet, you have to crack some eggs. And taking on debt is part of the process of building a business. This difference is about $10M and this is moving higher.
I use these metrics for two reasons. First, it establishes the basis for “what is my worst-case scenario?” If things go south by a long shot if the company were to be liquidated, what would there be? This concept of book value and assets helps to establish that metric, but it is by no means a panacea. But it allows me to look at a company and see if there is value there that the stock market is not pricing in.
Book value per share is a function of total assets, and you can see the book value here:
As it turns out, it is low compared to the stock price. So, you need to consider the forward earnings as well in the equation with valuing High Tide… up to a certain point. Let me explain.
First, forward earnings, should they be consistent with the numbers right here at $0.01 per share, with no increases in earnings – more on that in a moment – then High Tide would earn $0.04 per share. With 30x earnings multiple, that puts the company’s stock potential at $1.20. Nice. But wait.
High Tide is also taking on a losing company. True, revenues will nearly double. To me, that is huge. If you have two stores in different parts of a city, they each sell about the same amount of product but one is profitable and the other is not, bringing in the new management from the profitable company to teach the other unprofitable company how to be profitable should not be the world’s tallest mountain to climb. That to me is the opportunity.
So, High Tide is taking on a company that would significantly alter any future valuation models. I am not interested in getting into a stock that might be priced too high, but with this, there is still room. But, if you visualize forward, you can see a lot of potential.
I believe that the stock, albeit higher than book value, is still significantly below the future earnings multiples traditionally applied to growth stocks.
HITIF STOCK
HITIF stock may be above book value, but it is well below where it could be when you consider future earnings multiples:
I find this time and time again in the cannabis industry. And I can’t tell you how much I love to find stocks that are below value. Again, given the current multiples on future earnings, HITIF would be about $1.20 per share, and that is easy mathematics. But, as I mentioned, it is taking on a company that will bring this valuation back down, and this would devalue the stock.
But then you start to consider the new valuation of the company. Given revenues that will immediately double on a per quarter basis, and given the company wants to double the number of stores, wouldn’t the stock’s valuation be multiples higher given these variables?
WHERE WILL HIGH TIDE BE IN ONE YEAR’S TIME?
High Tide has just become a profitable company with $0.01 per share revenue. I believe that number would continue higher after a year’s time. But we do not need to speculate on that just yet. Earnings and future valuation would put the company’s stock at $1.20 per share today.
Then, High Tide is going to double its revenues with the recent acquisition of Meta Growth. Given the success that High Tide has had with its own retails stores, I believe that the newly acquired retail stores will see the same earnings. Given that, the future multiple pushes the stock upwards to $2.40 per share.
But the stated goal is for High Tide and Meta Growth to also double their own store count over the next couple of years. That is a huge leap forward for the combined companies. Nonetheless, I am looking at what management is doing with its costs and I believe it is well disciplined and mindful of its responsibility to provide value. So, I believe that if they were to open a new store up this discipline and mindfulness would be employed in a structured manner with any new store opening.
Given this potential, when the store count does reach the 113 level it has declared, that would put the per-share earnings at about $0.04. With 30x earnings multiple, this puts the stock at $4.80 per share in a period of time that it would take to get these new stores to profitability.
THE TAKEAWAY: IS HIGH TIDE A GOOD BUY?
It is going to take time and investment for High Tide to be able to hit its numbers for opening new stores. The pace it has declared is blistering and I have a tough time believing it can be done prudently. But prudence is the one thing High Tide has demonstrated it is committed to. Still, convincing the neighborhood to consistently shop at a new store takes time, no matter how good management is. I think High Tide will get to its stated goal of profitability with the newly merged company and that should occur in one year’s time. I also believe that it will open significantly more stores as it is projecting to do, and these new stores will likely be profitable in some period of time, but I do not believe that is possible within one year’s time.
Given that, I believe that this company will be a big winner at some point in a couple of year’s time. I am willing to be very patient in my outlook as to when these goals are achieved.
I am very bullish on High Tide.
HIGH TIDE IS BLAZING A TRAIL AND HERE IS WHY YOU SHOULD BUY
High Tide Articles
Seeking Alpha
By D. H. Taylor
December 26, 2020
Printed profitable per share for first time.
Doubling store count and revenue with recent acquisition, and this will likely double earnings in the very near future.
Stated goal of doubling store count after acquisition over period of time and will continue to increase shareholder value.
Stock price is significantly undervalued.
The beauty of the cannabis industry is that it is still fairly new while at the same time stocks are near all-time lows. When I analyze a company, there are a couple of variables that I look for in a cannabis industry participant. First, I take a broad look at the cannabis industry to see what the overall trends are. In Canada, cannabis is increasing every month more and more.
Then I look at a company’s respective earnings. Since Canadian cannabis sales continue to rise, my expectation is that a company doing business up in Canada should have rising earnings. Next are costs; gross costs and operating costs. I want to see if management is focused on the basics. Earnings are next. Given this environment where we are seeing rising retail sales month after month, if costs are kept down, can a company achieve profitability. The final piece of the puzzle is how much the stock is trading at versus where I think it is trading. As I said, cannabis stocks are near lows since they’ve been beaten down so much. That is an opportunity, as far as I am concerned.
When I looked at the data and charts on High Tide (OTCQB:HITIF), for all of the right reasons, it was love at first sight. Here is a breakdown of this Canadian company and why I think it is going to be a great company for a long time.
High Tide is a retailer and producer of cannabis with several strong brands and is even partnered with Snoop. High Tide is in the process of acquiring Meta Growth (OTCPK:NACNF) which overwhelmingly voted to be picked up by the larger company. The combination of the two will create the biggest cannabis retailer in Canada with 63 stores and plans to double that over the course of the next year. That is a very valuable place to be in with a budding industry.
It should be noted that High Tide has prominent investors in its own operations from both Aurora Cannabis (NYSE:ACB) and Aphria (NASDAQ:APHA); the latter of which is being merged with Tliray (NASDAQ:TLRY). High Tide is also on its way to NASDAQ, which will increase its credibility as well as liquidity.
As the fundamentals show, there are a lot of positive aspects of the company. But first, let’s check out the new data coming out of Canada.
CANNABIS IN CANADA
One of the things that I always keep an eye on is the cannabis industry’s overall sales numbers. As it turns out, Canadians are purchasing more and more and more cannabis. The recent data was just released and the 12-month increase is well over double, moving from $125M in October 2019 to $270M today, ~110% increase YoY:
There are 25 data points. Five of them are downward on a MoM basis; the rest have moved upwards. Keep in mind, the YoY is during a global pandemic so the increase is a bit more meritorious. One of the reasons is that cannabis in Canada is legal on the federal level. Because of that, a person can purchase their products and have them delivered to their door through the mail.
I do not see the rate of growth abating too much anytime soon. Continuously, I see the number of dispensaries opening increasing. Access to dispensaries is a strong indicator of sales. So, as the numbers increase for dispensaries, Canadian retail sales of cannabis increases.
REVENUE
As I mentioned, once you’ve looked at the overall industry, the next box to check would be the increasing revenues box. Keep in mind, High Tide is putting together the country’s largest network of retail dispensaries which is key to sales. Here is the result of the continued increases in dispensaries that High Tide has already put in its portfolio:
YoY, High Tide went from $6.2M to $16.2M, a nearly 200% increase in revenues. After checking with SEDAR, Meta Growth has reported revenues of ~$12M over the summer, so we can expect that this number will increase by almost double once the company reports combined earnings.
Right from the start, looking at the data for what the combined company can print, it is an upwardly increasing revenue stream. Granted, I believe there will be some point where the revenue starts to level off, or at the very least tapering its growth rate. But I do not see the current growth rate abating any time soon.
GROSS MARGINS AND OPERATIONAL EFFICIENCIES
I am a big stickler when it comes to management keeping costs in line. But, with cannabis companies, since they are all still relatively new, costs tend to be all over the map with the companies I’ve looked at. But, as I mentioned earlier, this company checks all of my boxes, and here are gross margins to show what I am talking about:
Consistency is one of the variables you are looking for so that management knows what it is working with. These numbers are highly consistent. This helps with management’s decisions because it generally knows where costs are going to come in. At the same time, High Tide has a large retail presence. Margins from products at a retail establishment are fairly consistent.
Operating efficiencies are another important indicator and High Tide is moving in the correct direction:
If gross margins are 41.3% and operating expenses are coming in at 31.1%, then management has a solid chance at profitability. Should the operating efficiencies improve from here, then earnings will do the same. The downward slide is impressive in the sense that it is persistent.
The combination of the two future companies merged together may improve margins even more, which will be an even larger benefit than where the company stands at this point. Keep in mind, when you merge two retail companies, you can then offer different products at an existing store and thereby improve the potential revenue on a same-store basis.
NET INCOME
As I had previously mentioned, net incomes were positive. With gross margins remaining consistent and operating efficiencies continually declining, it seemed to be a matter of when the company would print positive net income:
Now that the company has printed positive earnings, and with an even bigger revenue base to work with, we can start valuing this company on a future earnings potential.
However, I do want to point out that the SEDAR information I found on Meta Growth shows the past-three month earnings to be a loss of -C$23M for the quarter whereas High Tide printed a profit of C$4M. This will be the next step for the combined company to get to that point where there is a joint profit. Having the biggest cannabis retail presence in Canada is a great statistic to brag about. But, if it does not earn a profit, what good is it.
Having said that, High Tide has proven what management is capable of accomplishing. It certainly has a strong mix of brands to offer customers who are continuously shopping at its stores or High Tide would not have been able to print a profit. That is the template that I believe will be used to work with the new mix of stores. Because of this, I believe that getting the combined companies to profitability will be a lot quicker than what High Tide already accomplished alone.
While this may keep the stock price at bay, it is just a matter of time until I believe the stock will begin an appreciable rise upwards.
EQUITY AND BOOK VALUE
What is a company worth? There are two places to look for a company’s valuation when you want to know what they are worth. Value investors most certainly look at book value to see what assets the company has built up. Here are High Tide’s total assets:
One of management’s jobs is to continually increase value in a company. And this is what a value investor is looking for. I am a value investor at my core. This chart is continually rising and so that is a good thing. But there are two sides to the equation and liabilities are on the other side.
Just as assets have been increasing, so have liabilities:
This is by no means a bad thing. In order to create an omelet, you have to crack some eggs. And taking on debt is part of the process of building a business. This difference is about $10M and this is moving higher.
I use these metrics for two reasons. First, it establishes the basis for “what is my worst-case scenario?” If things go south by a long shot if the company were to be liquidated, what would there be? This concept of book value and assets helps to establish that metric, but it is by no means a panacea. But it allows me to look at a company and see if there is value there that the stock market is not pricing in.
Book value per share is a function of total assets, and you can see the book value here:
As it turns out, it is low compared to the stock price. So, you need to consider the forward earnings as well in the equation with valuing High Tide… up to a certain point. Let me explain.
First, forward earnings, should they be consistent with the numbers right here at $0.01 per share, with no increases in earnings – more on that in a moment – then High Tide would earn $0.04 per share. With 30x earnings multiple, that puts the company’s stock potential at $1.20. Nice. But wait.
High Tide is also taking on a losing company. True, revenues will nearly double. To me, that is huge. If you have two stores in different parts of a city, they each sell about the same amount of product but one is profitable and the other is not, bringing in the new management from the profitable company to teach the other unprofitable company how to be profitable should not be the world’s tallest mountain to climb. That to me is the opportunity.
So, High Tide is taking on a company that would significantly alter any future valuation models. I am not interested in getting into a stock that might be priced too high, but with this, there is still room. But, if you visualize forward, you can see a lot of potential.
I believe that the stock, albeit higher than book value, is still significantly below the future earnings multiples traditionally applied to growth stocks.
HITIF STOCK
HITIF stock may be above book value, but it is well below where it could be when you consider future earnings multiples:
I find this time and time again in the cannabis industry. And I can’t tell you how much I love to find stocks that are below value. Again, given the current multiples on future earnings, HITIF would be about $1.20 per share, and that is easy mathematics. But, as I mentioned, it is taking on a company that will bring this valuation back down, and this would devalue the stock.
But then you start to consider the new valuation of the company. Given revenues that will immediately double on a per quarter basis, and given the company wants to double the number of stores, wouldn’t the stock’s valuation be multiples higher given these variables?
WHERE WILL HIGH TIDE BE IN ONE YEAR’S TIME?
High Tide has just become a profitable company with $0.01 per share revenue. I believe that number would continue higher after a year’s time. But we do not need to speculate on that just yet. Earnings and future valuation would put the company’s stock at $1.20 per share today.
Then, High Tide is going to double its revenues with the recent acquisition of Meta Growth. Given the success that High Tide has had with its own retails stores, I believe that the newly acquired retail stores will see the same earnings. Given that, the future multiple pushes the stock upwards to $2.40 per share.
But the stated goal is for High Tide and Meta Growth to also double their own store count over the next couple of years. That is a huge leap forward for the combined companies. Nonetheless, I am looking at what management is doing with its costs and I believe it is well disciplined and mindful of its responsibility to provide value. So, I believe that if they were to open a new store up this discipline and mindfulness would be employed in a structured manner with any new store opening.
Given this potential, when the store count does reach the 113 level it has declared, that would put the per-share earnings at about $0.04. With 30x earnings multiple, this puts the stock at $4.80 per share in a period of time that it would take to get these new stores to profitability.
THE TAKEAWAY: IS HIGH TIDE A GOOD BUY?
It is going to take time and investment for High Tide to be able to hit its numbers for opening new stores. The pace it has declared is blistering and I have a tough time believing it can be done prudently. But prudence is the one thing High Tide has demonstrated it is committed to. Still, convincing the neighborhood to consistently shop at a new store takes time, no matter how good management is. I think High Tide will get to its stated goal of profitability with the newly merged company and that should occur in one year’s time. I also believe that it will open significantly more stores as it is projecting to do, and these new stores will likely be profitable in some period of time, but I do not believe that is possible within one year’s time.
Given that, I believe that this company will be a big winner at some point in a couple of year’s time. I am willing to be very patient in my outlook as to when these goals are achieved.
I am very bullish on High Tide.
HIGH TIDE IS BLAZING A TRAIL AND HERE IS WHY YOU SHOULD BUY
High Tide Articles
Seeking Alpha
By D. H. Taylor
December 26, 2020
Printed profitable per share for first time.
Doubling store count and revenue with recent acquisition, and this will likely double earnings in the very near future.
Stated goal of doubling store count after acquisition over period of time and will continue to increase shareholder value.
Stock price is significantly undervalued.
The beauty of the cannabis industry is that it is still fairly new while at the same time stocks are near all-time lows. When I analyze a company, there are a couple of variables that I look for in a cannabis industry participant. First, I take a broad look at the cannabis industry to see what the overall trends are. In Canada, cannabis is increasing every month more and more.
Then I look at a company’s respective earnings. Since Canadian cannabis sales continue to rise, my expectation is that a company doing business up in Canada should have rising earnings. Next are costs; gross costs and operating costs. I want to see if management is focused on the basics. Earnings are next. Given this environment where we are seeing rising retail sales month after month, if costs are kept down, can a company achieve profitability. The final piece of the puzzle is how much the stock is trading at versus where I think it is trading. As I said, cannabis stocks are near lows since they’ve been beaten down so much. That is an opportunity, as far as I am concerned.
When I looked at the data and charts on High Tide (OTCQB:HITIF), for all of the right reasons, it was love at first sight. Here is a breakdown of this Canadian company and why I think it is going to be a great company for a long time.
High Tide is a retailer and producer of cannabis with several strong brands and is even partnered with Snoop. High Tide is in the process of acquiring Meta Growth (OTCPK:NACNF) which overwhelmingly voted to be picked up by the larger company. The combination of the two will create the biggest cannabis retailer in Canada with 63 stores and plans to double that over the course of the next year. That is a very valuable place to be in with a budding industry.
It should be noted that High Tide has prominent investors in its own operations from both Aurora Cannabis (NYSE:ACB) and Aphria (NASDAQ:APHA); the latter of which is being merged with Tliray (NASDAQ:TLRY). High Tide is also on its way to NASDAQ, which will increase its credibility as well as liquidity.
As the fundamentals show, there are a lot of positive aspects of the company. But first, let’s check out the new data coming out of Canada.
CANNABIS IN CANADA
One of the things that I always keep an eye on is the cannabis industry’s overall sales numbers. As it turns out, Canadians are purchasing more and more and more cannabis. The recent data was just released and the 12-month increase is well over double, moving from $125M in October 2019 to $270M today, ~110% increase YoY:
There are 25 data points. Five of them are downward on a MoM basis; the rest have moved upwards. Keep in mind, the YoY is during a global pandemic so the increase is a bit more meritorious. One of the reasons is that cannabis in Canada is legal on the federal level. Because of that, a person can purchase their products and have them delivered to their door through the mail.
I do not see the rate of growth abating too much anytime soon. Continuously, I see the number of dispensaries opening increasing. Access to dispensaries is a strong indicator of sales. So, as the numbers increase for dispensaries, Canadian retail sales of cannabis increases.
REVENUE
As I mentioned, once you’ve looked at the overall industry, the next box to check would be the increasing revenues box. Keep in mind, High Tide is putting together the country’s largest network of retail dispensaries which is key to sales. Here is the result of the continued increases in dispensaries that High Tide has already put in its portfolio:
YoY, High Tide went from $6.2M to $16.2M, a nearly 200% increase in revenues. After checking with SEDAR, Meta Growth has reported revenues of ~$12M over the summer, so we can expect that this number will increase by almost double once the company reports combined earnings.
Right from the start, looking at the data for what the combined company can print, it is an upwardly increasing revenue stream. Granted, I believe there will be some point where the revenue starts to level off, or at the very least tapering its growth rate. But I do not see the current growth rate abating any time soon.
GROSS MARGINS AND OPERATIONAL EFFICIENCIES
I am a big stickler when it comes to management keeping costs in line. But, with cannabis companies, since they are all still relatively new, costs tend to be all over the map with the companies I’ve looked at. But, as I mentioned earlier, this company checks all of my boxes, and here are gross margins to show what I am talking about:
Consistency is one of the variables you are looking for so that management knows what it is working with. These numbers are highly consistent. This helps with management’s decisions because it generally knows where costs are going to come in. At the same time, High Tide has a large retail presence. Margins from products at a retail establishment are fairly consistent.
Operating efficiencies are another important indicator and High Tide is moving in the correct direction:
If gross margins are 41.3% and operating expenses are coming in at 31.1%, then management has a solid chance at profitability. Should the operating efficiencies improve from here, then earnings will do the same. The downward slide is impressive in the sense that it is persistent.
The combination of the two future companies merged together may improve margins even more, which will be an even larger benefit than where the company stands at this point. Keep in mind, when you merge two retail companies, you can then offer different products at an existing store and thereby improve the potential revenue on a same-store basis.
NET INCOME
As I had previously mentioned, net incomes were positive. With gross margins remaining consistent and operating efficiencies continually declining, it seemed to be a matter of when the company would print positive net income:
Now that the company has printed positive earnings, and with an even bigger revenue base to work with, we can start valuing this company on a future earnings potential.
However, I do want to point out that the SEDAR information I found on Meta Growth shows the past-three month earnings to be a loss of -C$23M for the quarter whereas High Tide printed a profit of C$4M. This will be the next step for the combined company to get to that point where there is a joint profit. Having the biggest cannabis retail presence in Canada is a great statistic to brag about. But, if it does not earn a profit, what good is it.
Having said that, High Tide has proven what management is capable of accomplishing. It certainly has a strong mix of brands to offer customers who are continuously shopping at its stores or High Tide would not have been able to print a profit. That is the template that I believe will be used to work with the new mix of stores. Because of this, I believe that getting the combined companies to profitability will be a lot quicker than what High Tide already accomplished alone.
While this may keep the stock price at bay, it is just a matter of time until I believe the stock will begin an appreciable rise upwards.
EQUITY AND BOOK VALUE
What is a company worth? There are two places to look for a company’s valuation when you want to know what they are worth. Value investors most certainly look at book value to see what assets the company has built up. Here are High Tide’s total assets:
One of management’s jobs is to continually increase value in a company. And this is what a value investor is looking for. I am a value investor at my core. This chart is continually rising and so that is a good thing. But there are two sides to the equation and liabilities are on the other side.
Just as assets have been increasing, so have liabilities:
This is by no means a bad thing. In order to create an omelet, you have to crack some eggs. And taking on debt is part of the process of building a business. This difference is about $10M and this is moving higher.
I use these metrics for two reasons. First, it establishes the basis for “what is my worst-case scenario?” If things go south by a long shot if the company were to be liquidated, what would there be? This concept of book value and assets helps to establish that metric, but it is by no means a panacea. But it allows me to look at a company and see if there is value there that the stock market is not pricing in.
Book value per share is a function of total assets, and you can see the book value here:
As it turns out, it is low compared to the stock price. So, you need to consider the forward earnings as well in the equation with valuing High Tide… up to a certain point. Let me explain.
First, forward earnings, should they be consistent with the numbers right here at $0.01 per share, with no increases in earnings – more on that in a moment – then High Tide would earn $0.04 per share. With 30x earnings multiple, that puts the company’s stock potential at $1.20. Nice. But wait.
High Tide is also taking on a losing company. True, revenues will nearly double. To me, that is huge. If you have two stores in different parts of a city, they each sell about the same amount of product but one is profitable and the other is not, bringing in the new management from the profitable company to teach the other unprofitable company how to be profitable should not be the world’s tallest mountain to climb. That to me is the opportunity.
So, High Tide is taking on a company that would significantly alter any future valuation models. I am not interested in getting into a stock that might be priced too high, but with this, there is still room. But, if you visualize forward, you can see a lot of potential.
I believe that the stock, albeit higher than book value, is still significantly below the future earnings multiples traditionally applied to growth stocks.
HITIF STOCK
HITIF stock may be above book value, but it is well below where it could be when you consider future earnings multiples:
I find this time and time again in the cannabis industry. And I can’t tell you how much I love to find stocks that are below value. Again, given the current multiples on future earnings, HITIF would be about $1.20 per share, and that is easy mathematics. But, as I mentioned, it is taking on a company that will bring this valuation back down, and this would devalue the stock.
But then you start to consider the new valuation of the company. Given revenues that will immediately double on a per quarter basis, and given the company wants to double the number of stores, wouldn’t the stock’s valuation be multiples higher given these variables?
WHERE WILL HIGH TIDE BE IN ONE YEAR’S TIME?
High Tide has just become a profitable company with $0.01 per share revenue. I believe that number would continue higher after a year’s time. But we do not need to speculate on that just yet. Earnings and future valuation would put the company’s stock at $1.20 per share today.
Then, High Tide is going to double its revenues with the recent acquisition of Meta Growth. Given the success that High Tide has had with its own retails stores, I believe that the newly acquired retail stores will see the same earnings. Given that, the future multiple pushes the stock upwards to $2.40 per share.
But the stated goal is for High Tide and Meta Growth to also double their own store count over the next couple of years. That is a huge leap forward for the combined companies. Nonetheless, I am looking at what management is doing with its costs and I believe it is well disciplined and mindful of its responsibility to provide value. So, I believe that if they were to open a new store up this discipline and mindfulness would be employed in a structured manner with any new store opening.
Given this potential, when the store count does reach the 113 level it has declared, that would put the per-share earnings at about $0.04. With 30x earnings multiple, this puts the stock at $4.80 per share in a period of time that it would take to get these new stores to profitability.
THE TAKEAWAY: IS HIGH TIDE A GOOD BUY?
It is going to take time and investment for High Tide to be able to hit its numbers for opening new stores. The pace it has declared is blistering and I have a tough time believing it can be done prudently. But prudence is the one thing High Tide has demonstrated it is committed to. Still, convincing the neighborhood to consistently shop at a new store takes time, no matter how good management is. I think High Tide will get to its stated goal of profitability with the newly merged company and that should occur in one year’s time. I also believe that it will open significantly more stores as it is projecting to do, and these new stores will likely be profitable in some period of time, but I do not believe that is possible within one year’s time.
Given that, I believe that this company will be a big winner at some point in a couple of year’s time. I am willing to be very patient in my outlook as to when these goals are achieved.
I am very bullish on High Tide.
how did this one work out,?
HIGH TIDE IS BLAZING A TRAIL AND HERE IS WHY YOU SHOULD BUY
High Tide Articles
Seeking Alpha
By D. H. Taylor
December 26, 2020
Printed profitable per share for first time.
Doubling store count and revenue with recent acquisition, and this will likely double earnings in the very near future.
Stated goal of doubling store count after acquisition over period of time and will continue to increase shareholder value.
Stock price is significantly undervalued.
The beauty of the cannabis industry is that it is still fairly new while at the same time stocks are near all-time lows. When I analyze a company, there are a couple of variables that I look for in a cannabis industry participant. First, I take a broad look at the cannabis industry to see what the overall trends are. In Canada, cannabis is increasing every month more and more.
Then I look at a company’s respective earnings. Since Canadian cannabis sales continue to rise, my expectation is that a company doing business up in Canada should have rising earnings. Next are costs; gross costs and operating costs. I want to see if management is focused on the basics. Earnings are next. Given this environment where we are seeing rising retail sales month after month, if costs are kept down, can a company achieve profitability. The final piece of the puzzle is how much the stock is trading at versus where I think it is trading. As I said, cannabis stocks are near lows since they’ve been beaten down so much. That is an opportunity, as far as I am concerned.
When I looked at the data and charts on High Tide (OTCQB:HITIF), for all of the right reasons, it was love at first sight. Here is a breakdown of this Canadian company and why I think it is going to be a great company for a long time.
High Tide is a retailer and producer of cannabis with several strong brands and is even partnered with Snoop. High Tide is in the process of acquiring Meta Growth (OTCPK:NACNF) which overwhelmingly voted to be picked up by the larger company. The combination of the two will create the biggest cannabis retailer in Canada with 63 stores and plans to double that over the course of the next year. That is a very valuable place to be in with a budding industry.
It should be noted that High Tide has prominent investors in its own operations from both Aurora Cannabis (NYSE:ACB) and Aphria (NASDAQ:APHA); the latter of which is being merged with Tliray (NASDAQ:TLRY). High Tide is also on its way to NASDAQ, which will increase its credibility as well as liquidity.
As the fundamentals show, there are a lot of positive aspects of the company. But first, let’s check out the new data coming out of Canada.
CANNABIS IN CANADA
One of the things that I always keep an eye on is the cannabis industry’s overall sales numbers. As it turns out, Canadians are purchasing more and more and more cannabis. The recent data was just released and the 12-month increase is well over double, moving from $125M in October 2019 to $270M today, ~110% increase YoY:
There are 25 data points. Five of them are downward on a MoM basis; the rest have moved upwards. Keep in mind, the YoY is during a global pandemic so the increase is a bit more meritorious. One of the reasons is that cannabis in Canada is legal on the federal level. Because of that, a person can purchase their products and have them delivered to their door through the mail.
I do not see the rate of growth abating too much anytime soon. Continuously, I see the number of dispensaries opening increasing. Access to dispensaries is a strong indicator of sales. So, as the numbers increase for dispensaries, Canadian retail sales of cannabis increases.
REVENUE
As I mentioned, once you’ve looked at the overall industry, the next box to check would be the increasing revenues box. Keep in mind, High Tide is putting together the country’s largest network of retail dispensaries which is key to sales. Here is the result of the continued increases in dispensaries that High Tide has already put in its portfolio:
YoY, High Tide went from $6.2M to $16.2M, a nearly 200% increase in revenues. After checking with SEDAR, Meta Growth has reported revenues of ~$12M over the summer, so we can expect that this number will increase by almost double once the company reports combined earnings.
Right from the start, looking at the data for what the combined company can print, it is an upwardly increasing revenue stream. Granted, I believe there will be some point where the revenue starts to level off, or at the very least tapering its growth rate. But I do not see the current growth rate abating any time soon.
GROSS MARGINS AND OPERATIONAL EFFICIENCIES
I am a big stickler when it comes to management keeping costs in line. But, with cannabis companies, since they are all still relatively new, costs tend to be all over the map with the companies I’ve looked at. But, as I mentioned earlier, this company checks all of my boxes, and here are gross margins to show what I am talking about:
Consistency is one of the variables you are looking for so that management knows what it is working with. These numbers are highly consistent. This helps with management’s decisions because it generally knows where costs are going to come in. At the same time, High Tide has a large retail presence. Margins from products at a retail establishment are fairly consistent.
Operating efficiencies are another important indicator and High Tide is moving in the correct direction:
If gross margins are 41.3% and operating expenses are coming in at 31.1%, then management has a solid chance at profitability. Should the operating efficiencies improve from here, then earnings will do the same. The downward slide is impressive in the sense that it is persistent.
The combination of the two future companies merged together may improve margins even more, which will be an even larger benefit than where the company stands at this point. Keep in mind, when you merge two retail companies, you can then offer different products at an existing store and thereby improve the potential revenue on a same-store basis.
NET INCOME
As I had previously mentioned, net incomes were positive. With gross margins remaining consistent and operating efficiencies continually declining, it seemed to be a matter of when the company would print positive net income:
Now that the company has printed positive earnings, and with an even bigger revenue base to work with, we can start valuing this company on a future earnings potential.
However, I do want to point out that the SEDAR information I found on Meta Growth shows the past-three month earnings to be a loss of -C$23M for the quarter whereas High Tide printed a profit of C$4M. This will be the next step for the combined company to get to that point where there is a joint profit. Having the biggest cannabis retail presence in Canada is a great statistic to brag about. But, if it does not earn a profit, what good is it.
Having said that, High Tide has proven what management is capable of accomplishing. It certainly has a strong mix of brands to offer customers who are continuously shopping at its stores or High Tide would not have been able to print a profit. That is the template that I believe will be used to work with the new mix of stores. Because of this, I believe that getting the combined companies to profitability will be a lot quicker than what High Tide already accomplished alone.
While this may keep the stock price at bay, it is just a matter of time until I believe the stock will begin an appreciable rise upwards.
EQUITY AND BOOK VALUE
What is a company worth? There are two places to look for a company’s valuation when you want to know what they are worth. Value investors most certainly look at book value to see what assets the company has built up. Here are High Tide’s total assets:
One of management’s jobs is to continually increase value in a company. And this is what a value investor is looking for. I am a value investor at my core. This chart is continually rising and so that is a good thing. But there are two sides to the equation and liabilities are on the other side.
Just as assets have been increasing, so have liabilities:
This is by no means a bad thing. In order to create an omelet, you have to crack some eggs. And taking on debt is part of the process of building a business. This difference is about $10M and this is moving higher.
I use these metrics for two reasons. First, it establishes the basis for “what is my worst-case scenario?” If things go south by a long shot if the company were to be liquidated, what would there be? This concept of book value and assets helps to establish that metric, but it is by no means a panacea. But it allows me to look at a company and see if there is value there that the stock market is not pricing in.
Book value per share is a function of total assets, and you can see the book value here:
As it turns out, it is low compared to the stock price. So, you need to consider the forward earnings as well in the equation with valuing High Tide… up to a certain point. Let me explain.
First, forward earnings, should they be consistent with the numbers right here at $0.01 per share, with no increases in earnings – more on that in a moment – then High Tide would earn $0.04 per share. With 30x earnings multiple, that puts the company’s stock potential at $1.20. Nice. But wait.
High Tide is also taking on a losing company. True, revenues will nearly double. To me, that is huge. If you have two stores in different parts of a city, they each sell about the same amount of product but one is profitable and the other is not, bringing in the new management from the profitable company to teach the other unprofitable company how to be profitable should not be the world’s tallest mountain to climb. That to me is the opportunity.
So, High Tide is taking on a company that would significantly alter any future valuation models. I am not interested in getting into a stock that might be priced too high, but with this, there is still room. But, if you visualize forward, you can see a lot of potential.
I believe that the stock, albeit higher than book value, is still significantly below the future earnings multiples traditionally applied to growth stocks.
HITIF STOCK
HITIF stock may be above book value, but it is well below where it could be when you consider future earnings multiples:
I find this time and time again in the cannabis industry. And I can’t tell you how much I love to find stocks that are below value. Again, given the current multiples on future earnings, HITIF would be about $1.20 per share, and that is easy mathematics. But, as I mentioned, it is taking on a company that will bring this valuation back down, and this would devalue the stock.
But then you start to consider the new valuation of the company. Given revenues that will immediately double on a per quarter basis, and given the company wants to double the number of stores, wouldn’t the stock’s valuation be multiples higher given these variables?
WHERE WILL HIGH TIDE BE IN ONE YEAR’S TIME?
High Tide has just become a profitable company with $0.01 per share revenue. I believe that number would continue higher after a year’s time. But we do not need to speculate on that just yet. Earnings and future valuation would put the company’s stock at $1.20 per share today.
Then, High Tide is going to double its revenues with the recent acquisition of Meta Growth. Given the success that High Tide has had with its own retails stores, I believe that the newly acquired retail stores will see the same earnings. Given that, the future multiple pushes the stock upwards to $2.40 per share.
But the stated goal is for High Tide and Meta Growth to also double their own store count over the next couple of years. That is a huge leap forward for the combined companies. Nonetheless, I am looking at what management is doing with its costs and I believe it is well disciplined and mindful of its responsibility to provide value. So, I believe that if they were to open a new store up this discipline and mindfulness would be employed in a structured manner with any new store opening.
Given this potential, when the store count does reach the 113 level it has declared, that would put the per-share earnings at about $0.04. With 30x earnings multiple, this puts the stock at $4.80 per share in a period of time that it would take to get these new stores to profitability.
THE TAKEAWAY: IS HIGH TIDE A GOOD BUY?
It is going to take time and investment for High Tide to be able to hit its numbers for opening new stores. The pace it has declared is blistering and I have a tough time believing it can be done prudently. But prudence is the one thing High Tide has demonstrated it is committed to. Still, convincing the neighborhood to consistently shop at a new store takes time, no matter how good management is. I think High Tide will get to its stated goal of profitability with the newly merged company and that should occur in one year’s time. I also believe that it will open significantly more stores as it is projecting to do, and these new stores will likely be profitable in some period of time, but I do not believe that is possible within one year’s time.
Given that, I believe that this company will be a big winner at some point in a couple of year’s time. I am willing to be very patient in my outlook as to when these goals are achieved.
I am very bullish on High Tide.