Shares of High Tide (NASDAQ:HITI) popped Friday on meme hype, closing at $7.50. Ignore the hype, and focus on the company.
Every industry needs a centralized retailer. Centralized retailers offer consistency of price, experience, inventory and convenience. For cannabis, that could be High Tide.
High Tide has the potential to transform itself into the “Walmart of cannabis.” Yes, it’s a long shot, but there is a high-enough probability — and enough upside potential — that it’s worth looking at buying HITI stock.
An Experienced Cannabis Retailer
High Tide is a decade-old, omnichannel cannabis retailer. They have about 85 stores spanning multiple Canadian provinces. In Alberta, High Tide controls roughly 10% of the market.
They also operate several e-commerce websites like GrassCity.com and SmokeCartel.com. These platforms sell cannabis and accessories to individuals in Canada as well as the United States.
The company is experiencing rapid growth. Revenues grew 166% in 2020, and last quarter they were up 179%. This growth isn’t coming at the expense of margins either. Gross margins are hovering around 40% and the company is also adjusted EBITDA positive, even during its hypergrowth phase.
Also worth noting is that High Tide major cannabis growers Aurora and Aphria, who was acquired by Tilray (NASDAQ:TLRY), are both investors in the company.
Why HITI Stock Will Rise
The Canadian cannabis market is highly fragmented. In order to meet rising demand over the next few years, consolidation and centralization will be necessary. Canada boasts over 600 cannabis stores in Alberta and Ontario, and many of these will likely be acquired, by companies like High Tide, as the shift to centralization takes place.
A company with a lot of cash will someday acquire everyone in the space and rebrand everything under a common retail name.
High Tide could be that company. They have the core strategy, cash, backing and financials to successfully pull it off.
For one, they’re already super focused on expanding its retail presence by acquiring other companies.
They are also sitting on about $33 million in cash on their balance sheet. That’s a lot for a cannabis retailer. And investor backing will only give them additional resources with which to acquire even more competition in the future.
High Tide is also profitable. Liquidity constraints aren’t a concern, and cash flows from the business will drive more mergers and acquisitions in the near-term.
Because of all these reasons, we believe High Tide stands a pretty good chance at becoming the “cannabis Walmart” of Canada.
If they can pull this off, HITI stock will soar. Definitely keep an eye on High Tide.
But it’s not the only high-growth, high-return stock on my radar today.
In fact, I have more than 40 hypergrowth stocks in my Innovation Investor newsletter service that could score investors Amazon-like returns over the next months and years.
These stocks include the world’s most exciting autonomous vehicle startup, a world-class “Digitainment” stock creating the building blocks of the metaverse, a company that we fully believe is a “Tesla-killer,” and many more.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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