High Tide HITI Stock Forecast & Analysis

High Tide HITI stock forecast is for $54.90 as High Tide.  I am having to edge revenue upward on revenue projections to $275M for 2022; up from ~$250M in my initial analysis.  High Tide is firing on all cylinders.  Their same store revenues are growing on an organic basis which is important revenue growth for any company that is ramping up.  As the company continues to increase its revenues, cost metrics will improve significantly from economies of scale.

With such a large increase in revenue, High Tide stock HITI will move up considerably.  But, for now, there is a lag in gross margins, operating efficiencies, and finally EBTIDA profits.  However, with the increased revenues, with more products moving through the system, maximizing operations, will increase margins.  If you were to look at this as a growing process, with High Tide continually ramping up, this is the beginning of something that looks like will turn into a big move upwards for HITI stock.  Visit the HITI Stock Forum & Discussion for more.

The cannabis industry continues to be hampered by short sellers amidst a broader legalization pathway in the US.  But, likely that will change after the November elections during the lame-duck Congress.  This will ignite interest in cannabis stocks.  Since High Tide is a Nasdaq-listed cannabis stock, this will draw in a lot more interest than some other OTC stocks because of its higher potential visibility.

High Tide HITI Financial Data

Here is a breakdown of High Tide Q4 financial data.

High Tide Gross Profits

High Tide’s revenue looks impressive.  Management is stating a run rate that should hit about US$275M for 2022.  I believe they will easily surpass their original revenue run rate projection of $250M.  As I show in the analysis below, I am targeting $275M for the calendar year 2022, and I have increased the future revenue projections.

In the meantime, looking at gross margins, there is significant upside potential here.  High Tide produces some 7,500 SKUs that are sold in its dispensaries.  High Tide is very much in control of its own margins because of this.  So, I can see that margins will improve.  Still, I used a modest margin rate when putting this projection together.

High Tide Operating Profits

Operating profits are still negative for High Tide.  Operating efficiencies are just above the 30% level.  As revenues continually increase, operating profits are going to increase from negative.  This is the starting point of High Tide getting to profitability.  They have some 140 dispensaries at this point and will likely be opening an additional 10 more before years’ end.

This creates a foundation for a future that is far bigger with revenues as High Tide opens more and more stores.  And, if High Tide were to expand even further throughout 2023, their future will be even bigger.  Revenue growth continually outpace even my projections and I am usually increasing them as the quarters move forward.

I expect that operating efficiencies will dip into the 20s-handle as revenues continue higher and costs are maintained.  This is the metric I usually gravitate toward to see how solid any one management group is within a company.

High Tide EBTIDA & Net Profits

EBITDA is low.  This is owed to both lower gross margins and elevated operating costs relative to revenue.  This is where I expect to see the biggest improvements.  With the big jump in revenue, gross margins will more than likely improve simply because costs are already being paid for by the first units being pushed through the system.  And, if operating costs remain contained, on a relative basis, this will add to the bottom line.

Given this, I am anxious to see next quarter’s print to see what improvements there will be.  I believe High Tide is just on the cusp of profitability.

High Tide Cash On Hand

From a debt ratio basis, High Tide is very competitive as they have ample cash at this point with low debt.  Cash burn is low at about $1M per quarter.  So, High Tide should not need to either increase cash via debt or stock sale.  And, the burn rate is low enough that more than likely High Tide will achieve profitability and add to a net change in working capital more and more.

Hight Tide Total Equity

I wanted to point out that High Tide made a swipe at Canopy Growth’s valuation in its latest earnings release conference call.  Canopy Growth and High Tide are printing about the same revenues per quarter.  However, Canopy Growth has a valuation far higher than High Tides.  But, it is important to note that Canopy Growth has total equity of some $2.6B versus High Tide’s $130M.  This would be one of the big reasons that High Tide valuation is significantly below that of CGC stock.

It is for this reason that I stress when you compare one company to another, any analysis would be incomplete if you merely look at just one metric.  You need to encompass all metrics and weigh them in totality.

That being said, High Tide has a ways to go until they clear their high-water mark for total equity.  This is what is going to continually drive future revenue gains and something I look toward regularly.

High Tide HITI Stock Forecast

The methodology for coming up with the HITI Stock forecast is from a discounted cash flow statement.  I break down the individual areas.  And, I used the run-rate mentioned by management for 2022, ~$275M.  But, I believe that High Tide has the ability to exceed that and so I am looking for ~$275M this year.  Also, margins have not been at their very highest yet.  My analysis did not factor in top-performing margin rates.

The bottom line is that from a Discounted Cash Flow basis, HITI Stock forecast would push HITI stock upwards.

High Tide HITI Stock Forecast

Is High Tide HITI A Good Investment?

One of the things I have always said about High Tide is that they will likely get acquired by a major US MSO.  If they do not get acquired first, they could also partner up with a major US MSO first as a strategic partnership.  This could be the first step towards an acquisition or merger.  This is one of the main reasons I have always had High Tide as a top pick.

The two aforementioned reasons that I see cannabis investments as a great investment are first that Federal Legalization of Cannabis will happen in 2022.  This will push pot stocks up in a big way. And, if Cannabis Cures COVID also proves to be a phenom that takes hold, this also will push cannabis stocks upwards.

But, without any of that (High Tide is primarily a Canadian company), High Tide is an undervalued cannabis company with big upside potential.  That alone makes this HITI stock a solid long-term holding.  Then, if the other three factors; acquisition, cannabis federal legalization, & cannabis cures COVID, this will add rocket fuel to a stock that has upside potential.

In the meantime, valuations for all cannabis stocks are misaligned with basic fundamentals.  This is a process that will take to work through.  But, I see a lot of momentum in the cannabis industry right now.