High Tide is the best cannabis stock, Ventum says

Following what he describes as a “strong” quarter, Ventum Capital Markets analyst Andrew Semple has maintained his “Buy” rating on High Tide (High Tide Stock Quote, Chart, News, Analysts, Financials TSXV:HITI).

On September 16, HITI reported its Q3m 2024 results. The company posted Net Income of $800,000 on revenue of $131.7-million, a topline that was up 6%, year-over-year.

“Over the last year, the High Tide team has presented investors with compelling proof points as to how we’re different than other retailers and our third quarter results offer even further evidence of this,” CEO Raj Grover said. “Our numbers continue to drive home the fact that we are a well-managed, innovative company that has grown responsibly while continuing to build value for shareholders. Numbers don’t lie, and this quarter’s record revenue, positive net income and free cash flow, for the fifth consecutive quarter, sit in stark contrast to some of our big-name competitors recently filing for bankruptcy protection or shutting down completely. Unlike these competitors, we are generating strong free cash flow from our operations, which has been powering our organic growth trajectory in recent months. This has allowed us to grow our cash on hand balance to $35.3-million, the highest ever.”

Semple says the gap continues to widen between High Tide and its competition.

“High Tide reported Q3/F24 results that beat expectations,” he wrote. “This marks the 12th consecutive quarter that High Tide surpassed our earnings expectations. High Tide shrugged off tough Canadian cannabis market conditions (May and June retail cannabis sales down by 2.8% and 6.6% YoY, respectively) to deliver another quarter of strong brick-and-mortar sales growth and market share expansion. The Company continues to separate itself from the competition, leveraging its balance sheet strength and scale to expand its retail ecosystem while many third-party retailers struggle to compete. The Company’s market share reached 12% in the provinces where it operates, putting High Tide well on the path to achieving its 15% target”

In a research update to clients September 17, Semple maintained his “Buy” rating and price target oif $8.50 on High Tide, implying a return of 194.1% at the time of publication.

The analyst thinks HITI will post Adjusted EBITDA of $37.8-million on revenue of $519.5-million in fiscal 2024. He expect those numbers will be Adjusted EBITDA of $35.4-million on a topline of $585.3-million in fiscal 2025.

“High Tide remains our highest conviction idea in Canadian cannabis,” Semple said. “It is one of a few cannabis companies in Canada to sustainably grow EBITDA, generate sustainable positive FCF, and maintain clear growth drivers ahead (near-to-medium term from the ongoing deployment of the discount club model and long-term from the expansion into the international markets upon possible legalization). We note the potential for additional upside to our forecast as High Tide could potentially utilize its growing cash position to support accelerated growth, make acquisitions that would be accretive to its current valuation, and with other developments to augment the discount club model.”