In this Marijuana Market Update, I answer a viewer’s question on High Tide Inc. (Nasdaq: HITI).
I also share the top-rated cannabis stock in the Green Zone Ratings universe.
High Tide Company Analysis
Harry recently asked:
Hey, Matt. Thanks for the video. Can you do an analysis on High Tide?
Harry, thanks for your question.
I recommended HITI for my Cannabis Watchlist back in March 2021 with strong expectations.
For those unfamiliar, High Tide is a retail cannabis company operating in Canada, Europe and the United States.
The company is based in Calgary, Canada and operates 111 retail locations in Ontario, Alberta, Manitoba and Saskatchewan.
But it has also added a strong e-commerce presence to its portfolio after purchasing grasscity.com, CBDcity.com and smokecartel.com.
High Tide Has Been Busy
In 2021, High Tide acquired 80% of NuLeaf Naturals, a private cannabinoid company based in Colorado, with an option to purchase the remaining 20% later. It has 11 different brands in the cannabis market sector.
On June 2, 2021, High Tide became one of the first cannabis companies listed on the Nasdaq Capital Market exchange — moving from the over-the-counter market.
The company recently completed a $2.8 million acquisition of BudRoom, giving it ownership of Fastendr. This automated technology integrates retail kiosks and smart lockers used for browsing, ordering and pickup of products.
What it all means is that while expanding its brick-and-mortar store presence in Canada, the company has invested millions in growing its e-commerce and digital arms as well.
High Tide’s Financials
All of this should pay dividends for High Tide.
The outlook for the company’s total annual revenue is great.
High Tide performed well during the COVID-19 pandemic, bringing in around $65.7 million in total revenue in 2020 and more than doubling that in 2021.
Projections suggest High Tide will generate more than $550 million by 2024 — nearly 7,000% higher than in 2017 — off the back of strong e-commerce position growth.
High Tide had a great start to 2021. Its stock price opened the year at around $3 per share. Within the first 45 days of the year, that stock price hit a high of $11.82 — a 279% jump in share price — thanks to strong cannabis tailwinds at the time.
But the good times quickly came to an end for HITI.
HITI’s 12 Month Drop
Thanks to those broader cannabis tailwinds becoming headwinds as federal legalization talks stalled, High Tide’s stock started a downward spiral.
In the last 12 months, HITI has shed 60% off its share price, from a high of $10.90 to around $4.37 per share.
If we look at the Money & Markets Cannabis Power Rating — a rating of all cannabis stocks meeting a certain market cap threshold — we can see the stock is rated well.
It scores a 92 overall, putting it on a “Strong Bullish” footing with a 77 on momentum — thanks to its push up in February — and a 69 on value.
The Cannabis Power Rating system ranks cannabis stocks against each other, not against the broader market. That gives it a fairer comparison.
In terms of value, HITI currently trades with a price-to-sales ratio of 1.63 and a price-to-book (P/B) ratio of 2.33.
Its price-to-earnings (P/E) ratio was as high as 3 over the last 12 months, while its P/B ratio peaked at 21. This tells us High Tide’s stock has rotated from being very overvalued to equal or somewhat undervalued over the last year.
But does this make HITI a buy for your portfolio?
The HITI Takeaway
In early February, my answer might have been “Yes,” because we saw a good upswing in its share price — indicating a potential momentum shift.
It’s the “buy high, sell higher” principle we work from at Money & Markets.
Buying a dip is fine. The problem is you never know when the dip stops.
We saw the stock price test resistance at around $5.50 and push down. Now, it looks for support at the $4.35 mark, and I’m not sure that is the bottom.
In all, I like High Tide. I liked it last year, and I like it now. Despite placing big bets on legalization that haven’t paid off, the company is positioned as a dominant player in the cannabis e-commerce market.
That is the big reason why its revenue projections I mentioned earlier are so strong.
But, before I would leap and buy HITI, I would look for a stronger uptrend in its share price. I want to see more on the momentum side of the stock before I would buy into it again.
Our Top-Rated Cannabis Stock
Some of you have asked if there are any cannabis stocks I’m looking at for potential investment.
Well, the highest-rated stock on our Cannabis Power Rating system is Alcanna Inc. (OTC: LQSIF). It is primarily an alcohol retailer in North America, but it does operate 53 cannabis stores in Alberta, Ontario and Saskatchewan.
LQSIF’s Gradual Uptrend
The stock had reached a 52-week high of around $8 per share in November but pared down those gains quickly.
Since February, I’ve seen a trend where the stock is looking at higher highs and higher lows along with a nice uptrend in momentum over the last few trading days — it closed up 3.3% on Monday at $5.44.
The stock is in the green across the board on our Cannabis Power Rating system with a 99 overall, an 87 on momentum and 92 on value.
Its P/E ratio is at 2.25 compared to the industry average of 15.3, and its P/B ratio is at 1.5 compared to the average of 2.3.
I want to see a day or two more of strong momentum, but I think Alcanna is a cannabis stock worth looking at.
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Matt Clark, CMSA®
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He is a certified Capital Markets & Securities Analyst with the Corporate Finance Institute and a contributor to Seeking Alpha. Prior to joining Money & Markets, he was a journalist and editor for 25 years, covering college sports, business and politics.