When it comes to the world of cannabis stocks, investors have no shortage of options. And one cannabis “penny stock” that has caught investors’ attention recently is High Tide (OTCMKTS:HITIF), a small Canadian cannabis retail store operator. Not too long ago, HITIF stock was trading hands around 10 cents. The HITIF stock price today clocks in at 50 cents.
It this a classic cannabis pump-and-dump scheme? Or the next big thing in the cannabis world?
It’s more likely the latter than the former. Indeed, if High Tide management executes, HITIF stock could be a potential 10X investment opportunity as the company turns into something like the Walmart (NYSE:WMT) of cannabis.
Here’s a deeper look.
HITIF Stock: The Story on High Tide
Here’s the quick rundown on High Tide and HITIF stock.
High Tide is a decade-old, hypergrowth cannabis omnichannel retailer.
On the brick-and-mortar side, the company operates about 85 stores across multiple provinces. The company is biggest in Alberta, where High Tide operates around 55 stores, which by our numbers gives the company roughly 10% retail store market share in that province.
In e-commerce, High Tide owns multiple websites – like GrassCity.com and SmokeCartel.com – each of which sell cannabis and smoking accessories to folks in both Canada and the U.S.
The company is growing very quickly, due to both higher sales per store and rapid unit expansion. In 2020, revenues grew a whopping 166%. Last quarter, they rose an even faster 179%.
Importantly, this growth isn’t coming at the expense of margins. Gross margins are hovering around a very healthy 40%, while the company – even during this hypergrowth phase – is adjusted EBITDA positive.
Also of note, major Canadian cannabis growers Aphria and Aurora are both investors in High Tide.
The Walmart of Cannabis?
Ok… now that you know about the company… here’s the bull thesis.
The Canadian cannabis market is highly fragmented. Consolidation and centralization will be necessary to meet surging demand over the next few years. Because there are already so many cannabis stores in Canada – over 600 stores in both Alberta and Ontario – and the infrastructure is already there, the most logical way consolidation will happen here is through acquisition.
Some company will emerge, with a ton of cash, acquire everyone in the space, and rebrand everything under one common retail chain.
High Tide has a chance to be that company.
That’s because High Tide has the strategy, the cash, the backing, and the financials to pull it off.
For starters, High Tide wants to do this: The company is hyperfocused on expanding its retail presence through store acquisitions.
Second, the company has the cash to execute on this strategy. High Tide is sitting on $33 million in cash on the balance sheet, which is a lot for a Canadian cannabis retailer.
Third, the backing of Aurora and Aphria give High Tide more resources to potentially tap into for more acquisition firepower down the road.
Fourth, High Tide is already profitable, so liquidity constraints aren’t a concern and, in the near future, the M&A-strategy could be driven by cash flows from the business.
For these reasons, we believe that High Tide has a fairly good chance of consolidating and centralizing the Canadian cannabis retail market under its brand.
If they do, this tiny $340 million company will soar.
Needless to say, then, HITIF stock deserves to be on you radar today.
Bottom Line on HITIF Stock
High Tide — and HITIF stock — offer a compelling and interesting way to play the coming cannabis boom.
But HITIF stock is far from the best cannabis stock to buy today. In fact, it’s not even one of the top 2 cannabis stocks to buy today.
Instead, the top 2 cannabis stocks to buy today belong to the industry’s growing powerhouse, and its most important technology infrastructure provider. That’s why I’ve included those two stocks as “Strong Buys” in my brand-new, venture-capital-style research platform, The Innovation Investor — which is aimed at uncovering the world’s most innovative and exciting companies, before anyone else, so that our readers buy in early on the next potential 10X stock market winners.
Click here to gain access to your next 10X investment opportunity today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this video.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s the focus of his premiere technology-focused service, Innovation Investor. To see Luke’s entire lineup of innovative next-generation mobility stocks, become a subscriber of Innovation Investor today.