Is High Tide still a buy post German election?

It may be rethinking a notable acquisition, but Roth analyst Bill Kirk still thinks there is money to be made on High Tide (High Tide Stock Quote, Chart, News, Analysts, Financials NASDAQ:HITI).

On February 25, HITI reported that its previously announced entry into the German market -via thw acquisition of 51% of Purecan GmbH- was on hold and that the company would explore “alternative arrangements”.

Kirk says the move is a political one and believes that HITI is still operating from a position of strength.

“After the February 23rd German election result – the CDU’s Merz is set to take the chancellor role (historically anti-cannabis party), and HITI has decided to reassess the terms of its planned acquisition of Purecan,” he explained. “We believe the regulatory environment remains positive for medical cannabis, but general access (telemedicine, prescription regulations etc.) is now less certain under new leadership. Given the election results, we believe High Tide is prudent to reassess, particularly as it pertains to the upfront costs, and its deal with Purecan. We believe their proof of concept remains compelling, with a strong Canadian LP interest ready for the German market. While the outcome of the election may delay longer term cannabis reform in Germany, HITI may be able to leverage the situation to facilitate an improved risk/reward entry into the market.”

In a research update to clients February 25, Kirk maintained his “Buy” rating and price target of $4.50 on HITI.

The analyst thinks the company will post EBITDA of $33.5-million on revenue of $583.0-million in fiscal 2025.

“With HITI having the leverage, we believe management could re-structure the deal to look more like a JV or a profit sharing agreement, without having to pay the €4.8M fee up front,” Kirk added. “We do not believe HITI is required to pay Purecan a fee to begin renegotiation. HITI’s balance sheet is well positioned, but this would be an opportunity to preserve some cash while still gaining exposure into what could become a significant cannabis market longer term.”