High Tide reported earnings earlier and I wanted to chime in on them. The company took a larger than normal loss – this was outside of the core business, however. In the meantime, analyst projections have High Tide hitting profitability in the coming years with a positive net earnings.
This is key because High Tide would be the first major Canadian company to achieve this. Keep in mind that Canada is fully legal throughout the nation. On the one hand, this shows what is possible throughout Canada. But, the country is awash with cannabis. There are heavy price pressures because of over supply. So, getting to net earnings positive would be a major achievement for High Tide.
Revenue
Revenue softened for the quarter. However, within the bigger trend, revenue is still looking to continually gain – see Projected Revenue below. The pace of revenue growth has slowed somewhat. But, with more dispensary openings scheduled, there should be continued increases in revenues.
It is organic growth that I would be most interested in – we do not know the individual same-store sales organic growth. If High Tide can continually increase its same-store sales, if buy marginally, this is an important feat to accomplish. It is one thing to open a new store and growth revenues. It is an entirely different accomplishment to see individual stores that have been opened for some time to grow revenues respectively.
Gross Margins
The Cabana Club program brought with it lower gross margins. Margins have been lower than comparative margins with other companies. Nonetheless, if increased economies-of-scale can produce positive net earnings, then this is the most important aspect of where High Tide is at this point.
With enough supply being pushed through the company’s system, the eventuality could be that despite the Club dynamics, increasing volume will probably increase margins.
Operating Efficiencies
A downward trend with operating efficiencies is what any company is looking for at any time. Operating Costs divided over total revenue shows how efficient management is at producing revenues. Keeping costs lower with operating costs is an important metric.
I have always mused, however, that High Tide would be an ideal M&A company for a US MSO – or, vice-versa. If this were to occur, this could potentially cut costs further by eliminating duplicate roles within a far bigger company.
EBITDA
At the core, EBITDA was positive and has been growing increasingly on a quarterly basis. Net earnings were negative for the quarter. Seeing the increase in EBITDA shows that the losses for the quarter were not part of the core business but, instead, financing and outside one-time cost.
Total Equity
I would want to see better gains with total equity. Being net earnings negative would mean that High Tide would have to borrow in order to cover those losses. Normally, the losses are smaller than what was seen for this quarter. Eventually, once High Tide hits positing earnings, this will start to increase. Then, High Tide could build upon that, borrowing against its equity in order to finance further growth within the company.
Total Equity
Analysts project revenue to increase this year. But, the increase declined somewhat from previous. Notwithstanding, 2025 is expected to gain even further with revenue and that is where there is an expectation of net earnings positive.
Conclusion
The forecast for 2025 and beyond is increasing positive EPS. This will really drive High Tide stock – HITI – further. As we get closer and closer to this, I would think that High Tide stock – HITI should start to move upward more and more.
Look for the DEA announcement to really accelerate moves for HITI. Then, as we get closer to 2025, look for HITI to start being driven by its profit potential on top of growing revenue.
I have always been a big fan of High Tide – it is one of my Top Picks. I think they are a solid-performing company and will likely do great things.