High Tide stock wins higher price target at Roth

Roth Capital Markets analyst Bill Kirk raised his price target on High Tide (High Tide Stock Quote, Chart, News, Analysts, Financials NASDAQ:HITI) to $5.00 from $4.50 and reiterated a “Buy” rating in a June 17 note, citing in-line revenue, a beat on Adjusted EBITDA, and improving same-store sales.

Kirk said there is strengthening supply-demand dynamics in Canada and the company is nearing a German acquisition, with due diligence in its final stages. As competitors pull back, High Tide continues to see low-cost expansion opportunities in its home market.

Roth Capital reported that High Tide generated $137.8-million in revenue for the quarter, slightly below the $138.5-million consensus, down 3.3% quarter-over-quarter due to three fewer selling days but up 11.1% year-over-year. Same-store sales rose 6.2%, up from 5.0% in Q1 and marking the strongest growth since Q1 2024. Retail revenue climbed 16% to $133.1-million. Gross margins improved 80 basis points quarter-over-quarter to 25.7%, though they declined 270 basis points from a year ago due to increased e-commerce activity. The company beat Adjusted EBITDA expectations with $8.1-million (5.85% margin) and posted $4.9-million in free cash flow, contributing to a trailing 12-month total of $12-million. Management reaffirmed full-year positive free cash flow guidance and ended the quarter with $34.7-million in cash, positioning High Tide to move forward with planned international M&A.

High Tide is a Canadian cannabis company with 162 retail stores across five provinces, plus e-commerce and wholesale operations. It sells cannabis products and smoking accessories through both physical and online channels and also manufactures and distributes branded and white-label accessory and CBD products.

Kirk said High Tide’s market share continues to grow, with Cabana Club membership reaching 1.9-million, up from 1.76-million last quarter. ELITE subscribers rose to 97,000, up 20% quarter-over-quarter and 120% year-over-year, with an average price of $35.

“Canna Cabana retail locations held a 12% market share in Canada, up from 11% last quarter, outperforming its fair share,” he said. “$1,648 in annualized retail sales per sq. ft. were down 2% q/q despite seasonal weakness and remain best-in-class. Other noteworthy takeaways from this quarter include: 1) according to a Sundial investor presentation, Sundial (SNDL – NC) increased its ownership in HITI by ~800k shares, and now holds ~5.2mn shares; 2) intoxicating hemp (Farm Bill compliant) continues to cannibalize U.S. CBD sales, but regulatory volatility/uncertainty likely gives High Tide hesitation from pursuing the category more aggressively; 3) Canadian competitors continue to close retail locations, or are choosing not to renew leases; and 4) potential provincial reform could help existing, compliant operators.”

Kirk has revised the outlook for High Tide, raising both revenue and Adjusted EBITDA forecasts. He now expects High Tide to post $577.7-million in revenue and $33.3-million in Adjusted EBITDA for fiscal 2025, up from earlier estimates of $570.1-million and $28.4-million. The updated forecast reflects improved third-quarter expectations, with projected sales of $146.3-million and EBITDA of $8.6-million, compared to prior estimates of $142.9-million and $7.2-million.

Kirk estimates High Tide will generate $620.5-million in revenue, representing year-over-year growth of 7.4%, and $40.7-million in Adjusted EBITDA, maintaining an EBITDA margin of 6.56%.

“High Tide continues to buck near-term competitive pressure in Canada, and may be a primary beneficiary of ongoing supply/demand improvements in the Canadian market as international export demand ramps,” he said. ”High Tide still remains the Canadian retail leader, has intentions to enter Germany in a cost-effective manner, and is guiding for positive FCF, while still opening another 20-30 locations in Canada this calendar year.”

-30-