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High Tide Stock is a Compelling Vertically-Integrated Cannabis Play

Friday, April 16, 2021 | Jea Yu
High Tide Stock is a Compelling Vertically-Integrated Cannabis Play

Vertically integrated cannabis producer and distributor High Tide (OTCMKTS: HITIF) stock is up triple digits on the year. While cannabis investors are familiar with producers like Tilray (NASDAQ: TLRY), cultivation manufacturers like Hydrofarm (NASDAQ: HYFM) and retailers like GrowGeneration (NASDAQ: GRWG), it’s rare to find a true vertically integrated cannabis player on a massive scale. High Tide fits the bill on a smaller scale. As a micro-cap penny stock, the price changes seem small but percentage-wise are large. While OTC stocks are highly risky, High Tide has applied for Nasdaq listing and meets all requirements with the exception of the $3 stock price threshold, which can be accomplished through a reverse split. This Canadian company produces cannabis products and has grown its distribution network of 80 retail locations in Canada and London. It bolstered its footprint with a clear path into the U.S. retail market with the acquisition of Smoke Cartel. The Company is seeing triple-digit growth providing transparency usually not often found with micro-caps on the OTC markets. The growth in Canada is a template for the U.S. markets hinging on federal legalization. Risk-tolerant investors seeking exposure with a truly vertically integrated cannabis play can monitor opportunistic pullback levels for speculation.   

Q1 FY 2021 Earnings Release

On March 30, 2021, High Tide reported its fiscal first-quarter 2021 results for the quarter ended January 2021. The Company reported revenues up 179% year-over-year (YoY) to $38.3 million versus $13.7 million in the year ago period. Gross profits rose 208% to $14.8 million versus $4.8 million in the year-ago period. Adjusted EBITDA was $4.6 million compared to (-$0.88 million) in the prior year period. The Company earned $34.2 million of revenues in Canada, $3.9 million in the U.S. and $0.2 million internationally. Retail accounted for $36.8 million and $1.5 million was wholesale. The Company ended the quarter with $33 million in cash, as of March 31, 2021. The Company completed its acquisition of META Growth Crop, a leading cannabis retailer and Smoke Cartel. The Company opened nine cannabis retail locations comprised of seven in Alberta and two in Ontario, Canada and expects to grow retail locations to 30 open stores by Sept. 30, 2021. The cap is scheduled to increase to 75 locations afterwards.

U.S. Penetration

High Tide CEO, Raj Grover stated, “With Smoke Cartel and Grasscity, we now own both the largest and second-largest e-commerce platforms for consumption accessories in the world, with a combined total of 33 million site visits in 2020, which sets us up to quickly begin cannabis e-commerce sales when federal legalization occurs in the U.S., while still generating healthy revenue in the U.S. today. He further summed it up, “The Company has been actively following developments in the U.S. cannabis sector, and while it appears that further liberalization regarding the federal regulatory and legislative environment is possible, our immediate strategy does not rely on regulatory change. Despite this, we remain just one transaction away from entering the bricks-and-mortar retail market in the U.S. when federally permissible. High Tide believes it is very well positioned to take advantage of the growing ancillary and hemp-derived CBD markets and estimates its current revenue run rate in the U.S., pro forma from the Smoke Cartel acquisition, to be over $25 million today.”

Organic and Acquisition-Powered Growth

The Company is aggressively pursuing more accretive acquisitions on the back of META and Smoke Cartel. High Tide opened eight stores in March bringing the tally up to 80 total stores with a concentration on Ontario, Canada. The vertical integration enables the Company to be a one-stop-shop galvanizing customers through a loyalty program as illustrated by the Canna Cabana concept and loyalty program. Despite being a penny stock for now, this cannabis play is a compelling value proposition exhibiting growth and profitability with a solid template moving forward.

High Tide Stock is a Compelling Vertically-Integrated Cannabis Play

HITIF Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a more precision near-term perspective of the landscape for HITIF stock. As a micro-cap stock, it’s important to understand that liquidity can be thin and only high-risk tolerant speculators should even consider exposure. The weekly rifle chart peaked at the $0.89 Fibonacci (fib) level. The uptrend has a flat 5-period moving average (MA) at $0.64 with upper Bollinger Bands (BBs) at $0.97. The weekly stochastic is also stalling to either form a bullish mini pup on a breakout back up through the weekly 5-period MA or a cross down on the weekly market structure high (MSH) sell trigger below $0.53. The daily forms a market structure low (MSL) buy trigger above $0.69. The daily weekly rifle chart has a downtrend with a falling 5-period MA resistance at $0.60 and lower daily BBs at $0.55. The daily stochastic mini inverse pup has made a full oscillation to the oversold 20-band which can provide opportunistic pullback price levels at the $0.55 fib, $0.49 fib, $0.44 fib, $0.36 fib, $0.32 fib, and the $0.26 fib. Upside trajectories range from the $0.79 fib towards the $1.33 fib. Keep an eye on peers TLRY, Canopy Growth (NASDAQ: CGC) and GRWG as these Canadian cannabis stocks can move together.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
High Tide (HITIF)1.3$7.93+5.7%N/AN/ABuy$0.60
Hydrofarm Holdings Group (HYFM)1.5$55.93+1.5%N/AN/ABuy$75.00
GrowGeneration (GRWG)2.1$39.93+12.4%N/A798.76Buy$50.89
Tilray (TLRY)1.4$13.93+1.8%N/A-3.07Hold$20.67
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