- High Tide (TSXV:HITI), the second-largest cannabis retailer in North America by store count, according to ATB Capital Markets, will open two Canna Cabana stores later this month in Alberta and Saskatchewan
- The new stores mark High Tide’s 175th and 176th Canna Cabana locations in Canada, with the pervasive franchise and its reliable cash flow positioning the company to continue its impressive growth trajectory
- High Tide operates the largest non-franchised cannabis retail chain in Canada, with 176 current locations across British Columbia, Alberta, Saskatchewan, Manitoba and Ontario
- High Tide stock has added 94.30 per cent year-over-year, but remains down by more than 50 per cent since inception in 2019
High Tide (TSXV:HITI), the second-largest cannabis retailer in North America by store count, according to ATB Capital Markets, will open two Canna Cabana stores later this month in Alberta and Saskatchewan.
The location in Emerald Park, Saskatchewan, just east of Regina, will open its doors on Saturday in a fully built-out former retail cannabis store, while the location in Cochrane, Alberta, will open on Sunday, looking to benefit from the town’s five-year growth rate of 34.31 per cent, median household income of C$127,000, and one-year business growth rate of 7.20 per cent, according to Friday’s news release.
The new stores mark High Tide’s 175th and 176th Canna Cabana locations in Canada, with the pervasive franchise and its reliable cash flow positioning the company to continue its impressive growth trajectory.
Why High Tide stock is undervalued
As one of North America’s largest retail cannabis operators, in addition to assets across e-commerce, technology and a growing brand portfolio, High Tide benefits from a high barrier to entry and the competitive advantage of scale, which allows it to offer worthwhile succession plans to smaller operators and acquire them at a discount. These qualities are being valued at zero based on the company’s current market capitalization of C$244 million, trading at a little more than the C$234 million in assets on its balance sheet.
Furthermore, High Tide stock is trading at only 0.5x revenue, even though it has grown revenue by 15.8x over the past five years to a little more than C$487 million and found its way to profitability in the process, generating C$22.7 million in free cash flow over the past four quarters, break-even net income in Q1 2024 and C$200,000 in Q2 2024 with a reasonable 21.1 per cent debt-to-equity ratio.
Canna Cabana’s sales are at the heart of High Tide’s success, having increased same-store sales 111 per cent since 2021 on a monthly basis, compared with only 27 per cent across the five provinces in which it operates, granting it an average of 10.9 per cent market share in each of these provinces.
As more inefficient operators come calling for an exit plan and U.S. cannabis legalization picks up steam, High Tide finds itself in the too-big-to-fail category, with the ability to nestle more comfortably within it through continued self-funded acquisitions.
Leadership insights
“These new store openings showcase the continued momentum we are generating from taking over leases of fully built cannabis locations as many of our publicly traded and private competitors continue to go out of business,” Raj Grover, founder and chief executive officer of High Tide, said in a statement. “This saves our company time, money and other resources while continuing to propagate the Canna Cabana brand in communities across the country.”
“With 14 new locations announced since the beginning of this year, we remain on target to reach our communicated goal of adding 20 to 30 new Cabanas by the end of this calendar year,” Grover added. “Given our strong free cash flow profile, we plan to continue our brisk greenfield trajectory, which may be supplemented by additional M&A in the second half of this year. I’m excited about how our innovative discount club model is continuing to outperform our peers, and we are confident our market share will increase as our retail expansion picks up steam.”
About High Tide
High Tide operates Canna Cabana, the largest non-franchised cannabis retail chain in Canada, with 176 current locations across British Columbia, Alberta, Saskatchewan, Manitoba and Ontario.
High Tide Inc. stock (TSXV:HITI) is down by 1.6 per cent, trading at C$3.07 per share as of 10:34 am ET. The stock has added 94.30 per cent year-over-year, but remains down by more than 50 per cent since inception in 2019.
Join the discussion: Find out what everybody’s saying about this cannabis stock on the High Tide Inc. Bullboard, and check out Stockhouse’s stock forums and message boards.
The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
(Top photo of High Tide’s Canna Cabana retail store brand: High Tide)
