High Tide is our “highest conviction idea” in cannabis, analyst says

Following the company’s first quarter results, 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 March 17, HITI reported its Q1, 2025 results. The company posted Adjusted EBITDA of $7.1-million on revenue of $142.5-million, a topline that was up 11% year-over-year.

“I am pleased to report yet another quarter featuring record revenue,” CEO Raj Grover said. “This continued momentum is supported by our core Canadian bricks-and-mortar business which is generating double digit growth, and continues to get stronger every day. This is demonstrated by the fact that Q1 same store sales experienced their fastest pace of growth in four quarters. At the same time, Canadian Cabana Club membership has exceeded 1.76 million, with ELITE memberships also growing at their fastest rate since the club’s inception.”

Semple says some bottom line softness is overshadowed by HITI’s topline expansion, and expects that the company’s margins should start to fill in soon.

“High Tide 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 was 11% in the provinces where it operates (unchanged), putting High Tide well on the path to achieving its 15% target,” he wrote. “We emphasize that this quarter reflects several strategic decisions which have reduced near-term margins to expand long-term sales and earnings power. First, High Tide accelerated new store development. The Company added 29 new stores in C2024 (compared to 13 in C2023), and is targeting 20-30 new stores in 2025. Q1/F25 results reflect an ongoing earnings drag from the new stores opened last year that are still ramping sales, while the Company is also incurring additional costs in anticipation of new stores set to open later this year. Assuming new stores take 12-24 months on average to reach maturity, High Tide is right in the middle of this accelerated ramp-up period, meaning it is likely near peak earnings drag from new store investments, and earnings should begin to improve in H2/F25.”

In a research update to clients March 18, Semple maintained his “Buy” rating and price target of $8.50 on HITI, implying a return of $184.3% at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of $27.8-million on revenue of $580.6-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $46.2-million on revenue of $672.9-million in fiscal 2026.

“High Tide remains our highest conviction idea in Canadian cannabis,” Semple added. “It is one of the few cannabis companies in Canada to sustainably grow EBITDA, generate sustainable positive FCF, and maintain clear growth drivers ahead. 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.”