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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
Dec. 25, 2020
Seeking Alpha
By D. H. Taylor
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 on the chart above. 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.
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.
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.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in HITIF over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
High Tide Is Blazing A Trail And Here Is Why You Should Buy
Dec. 25, 2020
Seeking Alpha
By D. H. Taylor
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 on the chart above. 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.
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.
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.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in HITIF over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
I think it’s holding up pretty strong so far
maintaining a good portion of its gains from .13
Anyone know the next earnings report?
is it mid january?
ahh yes part 2 of the plandemic..
Saw this coming in many 2021 agenda videos on youtube
that would be something if it was a real low of the day but a single market manipulator trade that low, is not
really what it traded at all day,
it’s same for the high of the day..
not real
normal average people were not able to buy anything lower then .17 or slightly under it if they were really lucky
the whole market was down today which is weird to me especially after the stimulus package news
yes
pretty much in line with all other pot stocks today.. holding strong above .17 only down 1 to 2%
i don’t mind 3 steps forward and 1 step back
slow and steady wins the race!
i don’t think this is dropping below .17 again
we may get as low as 17 or mid 17s on bad sell off days
im glad i got in at .135 but because i’m in so low i don’t even wanna sell alittle of my shares even when it’s hitting 19 and 20
i could easily sell some in the 19s and potentially buy them back in the 17s but it’s a risk to let them go
i much rather just buy more and add to my stock pile when i can even though i would be averaging up lol
i have 120,000 shares snd would love some more!
They maybe very slow or less responsive to due to people not working or working from home. It’s not typical time for typical
work with typical employees working from the office. Atleast that’s how it is here in the US. I been trying to get in touch with an old employer for over 2 weeks now for something and with their HR working from home it’s difficult to get a response in a timely manner.
Also this yes this is way too cheap for a company bringing in the revs it does plus being profitable. But while still on the otc this is what we have to deal with.
i don’t see this dropping below .17 now especially since that is the lowest conversion price a
can only go up from here
Wow what a great deal! These guys know that this is going no where but up and wanted to be as flexible as possible with high tide so they can come along for the ride
i have seen reverse splits that were done to uplist get split from below a dollar to $5 or $10 then keep going up.
the first day of the split there’s usually alittle self off but most the time i see uplist RS either hold the position or many times due to the uplist good news they take off north after the RS
Good day to average down or add
most my pot stocks i watch are all
red
plus this is coming off a huge gain day so of course there is selling
i just can’t bare to let any go especially since i got in at .135
normally i would have sold some to buy back on dip but can’t do it with this one lol
i believe this is only of those penny stocks that will be a dollar soon and people will look back and wish they loaded this in 2020
if this keeps up they won’t need such a big RS to pull off the uplist
they maybe a $1 or more by the time the application can get approved
Damn look at that high tide go!!!
best long term play for coming 2021
HITIF
https://hightideinc.com/wp-content/uploads/2020/11/High-Tide-Investor-Presentation-2020-11-03.pdf
Damn look at that high tide go!!!
best long term play for coming 2021
HITIF
https://hightideinc.com/wp-content/uploads/2020/11/High-Tide-Investor-Presentation-2020-11-03.pdf
Damn look at that high tide go!!!
best long term play for coming 2021
HITIF
https://hightideinc.com/wp-content/uploads/2020/11/High-Tide-Investor-Presentation-2020-11-03.pdf
Damn look at that high tide go!!!
best long term play for coming 2021
HITIF
https://hightideinc.com/wp-content/uploads/2020/11/High-Tide-Investor-Presentation-2020-11-03.pdf
Wow look at High Tide go!!!
HITIF
https://hightideinc.com/wp-content/uploads/2020/11/High-Tide-Investor-Presentation-2020-11-03.pdf
i have a 120k tucked away till atleast next year if not longer
Already up a 16-17% from taking my position earlier this week.. But this is so under valued and has so much upside potential i don’t even wanna give up a small portion of my arsenal of shares i have collected. Waiting for that green up 300-500% before i sell any.
other good news is they will be off the otc and have more exposure to more legit investors. No more otcx games holding them down
When is the next earnings reported?
January?
yeah plus just became profitable
JohnCM knows more about them then i do
i just started digging but grabbed a bunch while it’s still this low
yes i took mine
yes thank you it’s amazing
much smaller share structure and already profitable
https://hightideinc.com/wp-content/uploads/2020/11/High-Tide-Investor-Presentation-2020-11-03.pdf
Gobble Gobble Gobble
give me more!
yeah i’m out moved everything to high tide
may grab a small amount back if it goes back down to 10 but i’m going heavy in high tide now
huge upside, profitable, nice tight OS
should be hearing me vent about otcx crap over there since they don’t have much of a hold on them
u fell for it and got out while green thank god
those bags were getting heavy
thanks for your tip on high tide
i looked over their financials and they are a much better long term play and fraud scamming otcx and friends don’t have their hooks in it as much as they do curaleaf so it can trade more organically
They are a zip code changing play
Hmm still showing a 200 loss
oh average is 10.58
i should
sell and cut my small losses and buy this back at 9 next week
bet if u hold it longer it will go back down
but if i sell it then it will go to 11 and change before crashing back to 9
not till over 1050 lol
otcx has been reported to SEC for fraud and stock manipulation with this stock and many others on the otc
otcx fraud scamming days are numbered
hope good things ahead
so this can get back above 10.50 and i can get out of this sloppy no good otcx run stock.
can’t wait to move my money to a better run business
my mistake for backing a local company that i’m a customer at, but what makes no sense is the bloated float
way too many shares out for dumping
Nice job keeping those bids coming in
they need more to dump on so keep them coming
otcx and friends still have plenty of their paper fraud discounted shares to dump
same mo everytime
fake bids to entice the sheep to keep those bids coming to dump on
fake backing off just to hit bids hard once the bot detects too much buying
then they put up a fake wall to box it in
fake fraud scam otcx stinky pinky tactics
Curaleaf sees that but the fraud vultures over at otcx saw it as well and saw it as an opportunity to dump butt loads of their discounted paper shares on any bids they saw.
Best part is we closed red all week and now monday of these fraudsters still have there discounted toxic debit shares left we will be dragged down to 8s come monday
that’s how these toxic debit manipulators work
see it all the time here in stinky pinky land
yep that was a time when all pot stocks were down and everything was questionable
results of election are in...legislation is getting passed
but this stinky pinky trades like a pump and dump with its freshly printed shares given out just like toxic debit to vulture capitalist fraud manipulators that use the fraud algorithm bots like
otcx snd valx to dump their paper shares on any good news or bids they see.
sell your soul to the devil you go to hell
sell your shares to these vultures and give up control of your stock to market manipulators like this.
Yes! seller of freshly printed shares for otcx to dump.
-5% down a day, keeps the investors away
and the fact that this is a bloated float stinky pinky doesn’t help much either
disgusting performance all week
Cresco is about to be a higher price per share company hahah ridiculous
good job management
Can’t wait till this has one of those pump and dump scams again
so it can go back up over 10 and i can get out and break even from this disgusting bloated float stinky pinky
i should have stayed out when i got out at 10 but with the elections and all silly me gets back in after selling .. big mistake with this stinky pinky
didn’t listen to my own warnings that this share printing scam can’t hold a gain for sheet.
Horrible management horrible business plan.
can’t wait to get out of this and go long with a good company like cresco or truelieve