Should You Buy High Tide ($HITI) Stock? Key Financials and Risks Every Investor Should Know

The cannabis industry is growing, but it’s not exactly smooth sailing. High Tide Inc. ($HITI), one of Canada’s biggest cannabis retailers, has been making some moves that caught my eye. They’re expanding their retail footprint, growing their loyalty programs, and just posted a profitable quarter. But is it worth considering for midterm growth? Let’s dig in.

What Does High Tide Do?

High Tide runs 183 cannabis retail stores across Canada. They also have this loyalty program called Cabana Club with over 1.55 million members. There’s a premium tier too, called ELITE, aimed at high-spenders. The whole idea is to keep customers coming back and spending more. It’s not just about selling cannabis; it’s about building long-term customer relationships.

For more insights into companies leveraging loyalty and recurring revenue, check out my blog on SentinelOne ($S) and its investment potential.

How Is High Tide Performing Financially?

Their Q3 2024 numbers look decent:

• Revenue hit $131.7M, up 6% from last quarter and the same time last year.
• Net income was $0.8M, a big turnaround from a $3.6M loss in Q3 2023.
• Free cash flow? Positive for five straight quarters, totaling $21.8M over the past year.

This shows they’re improving financially while still growing. If you’re interested in other companies making financial turnarounds, you might like my breakdown of MicroStrategy’s ($MSTR) Bitcoin strategy.

Is High Tide Undervalued?

Looking at valuation metrics, High Tide seems like it might be underpriced:

• P/S Ratio: 0.40, meaning investors are paying $0.40 for every $1 of revenue. That’s pretty low for the cannabis space.
• P/B Ratio: 1.40, which isn’t bad—it suggests the stock’s price is fair relative to its assets.
• P/E Ratio: Not super helpful right now since their profitability is new and not consistent yet.

If you’re into undervalued stocks with potential, my post on Hut 8 Mining ($HUT) and its Bitcoin + AI focus might also interest you.

Why Are Loyalty Programs Driving Growth?

The loyalty programs are a big deal for High Tide. Cabana Club grew 41% year-over-year, and ELITE memberships grew a crazy 203%. These programs are designed to lock in repeat customers, which is critical in a competitive market like cannabis retail.

What Are Analysts Saying About High Tide?

Most analysts are optimistic:

• 83% recommend a Buy.
• Average price target is $5.79. The stock’s trading closer to $3 right now, so there’s potential upside if things keep trending well.

What Are the Risks of Investing in High Tide?

It’s not all smooth sailing. There are risks:

1. Regulatory Uncertainty: Cannabis is still federally illegal in the U.S., which limits their growth opportunities.
2. Market Saturation: Canada’s cannabis market is crowded, and that could pressure profit margins.
3. Volatility: Cannabis stocks are known for their price swings, so you’ll need a strong stomach for this one.

To dive into high-risk stocks with potential rewards, see my analysis of Marathon Digital ($MARA).

Is the Cannabis Industry Growing?

Yes, but it’s a mixed bag. Globally, the market is expected to grow at about 15.4% annually through 2029. In the U.S., states like New York are raking in revenue—close to $1 billion annually since legalization. High Tide’s growth aligns with these trends, but the regulatory barriers are still a big deal.

Should You Consider High Tide ($HITI) for Midterm Growth?

High Tide has shown solid progress: growing revenue, successful loyalty programs, and even turning a profit last quarter. Plus, it seems undervalued compared to its peers. But the risks are there—regulatory hurdles, competition, and the usual volatility of cannabis stocks. If you’re okay with some uncertainty and believe in the cannabis industry’s growth, $HITI might be worth a closer look.

Final Thoughts

High Tide isn’t a slam dunk, but it’s an interesting stock if you’re looking for midterm growth in a sector that’s still finding its footing. As always, do your research and think about whether the risks fit into your overall strategy. If you’re exploring growth sectors, my blog on TeraWulf’s AI and crypto expansion might provide another angle to consider.

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