By Michael Kim
READ THE FULL HITI RESEARCH REPORT
We are initiating coverage of High Tide Inc. (NASDAQ:HITI) with a 12-month price target of $6.00, translating into sizeable upside potential from the stock’s current price. High Tide is the largest cannabis retailer in Canada, operating 200+ stores across Alberta, Ontario, Saskatchewan, British Columbia, and Manitoba. Beyond traditional brick-and-mortar cannabis stores in Canada (branded Canna Cabana), the company markets Cannabidiol (CBD) and consumption accessories online across Canada, the U.S., the United Kingdom, and Europe. Earlier this month, HITI closed the acquisition of a 51% ownership stake in Remexian Pharma GmbH, a leading low-cost medical cannabis importer/wholesaler in Germany, one of the highest-growth markets in the world, with much of the accelerating demand satisfied through imported cannabis from Canada. CBD and consumption accessory brands include NuLeaf Naturals, FAB-CBD, Blessed CBD, Grasscity, Smoke Cartel, Daily High Club, and DankStop.
Our investment thesis revolves around:
1. More favorable regulatory landscape north of the border: Unlike here in the U.S. where the sale of cannabis remains illegal at the federal level, the Cannabis Act and the Cannabis Regulations in 2018 allow for and govern the cultivation/production, processing, retail sale, and distribution of cannabis for both medical and recreational use across Canada. Following the legalization of recreational-use cannabis, Canada has grown into a C$5.5 billion market, with a majority of sales (~C$4.5 billion in May 2025) coming from the five provinces in which High Tide maintains operations. Importantly, Canadian provinces and municipal governments maintain control over the regulation of retail sales and distribution of cannabis from Licensed Producers in accordance with applicable Retail Store Authorizations – not too dissimilar to the state-specific regulatory framework here in the U.S.
Turning to the U.S., while HITI’s brick-and-mortar cannabis sales remain confined to Canada at present, we would expect management to turn its sights south of the border should a more favorable regulatory backdrop emerge. While the prospect of cannabis rescheduling in the U.S. remains decidedly uncertain, a positive ruling likely represents a powerful upward revaluation catalyst for cannabis stocks reflecting multiple financial/tax benefits for publicly-traded companies.
2. Plenty of growth levers to pull: We look for a powerful step up in HITI’s earnings power reflecting the recent majority equity investment in Remexian in Germany, in addition to a number of compelling growth catalysts, including:
a. With 207 stores across Canada, High Tide’s Canna Cabana chain remains the largest cannabis retailer in Canada. Moreover, Same-Store Sales (SSS) increased 132% between October 2021 and March 2025, whereas peers suffered a 10% decline in SSS on average during the same time period.
b. Management remains focused on continuing to broaden the retail footprint, and recently reiterated the company’s goal of adding 20-30 new stores this year. Over time, we anticipate the number of Canna Cabana locations across Canada to reach 300 and beyond, thereby facilitating sustainable growth.
c. Third, the company’s Cabana Club loyalty program continues to grow (up to 2+ million memberships in Canada), with participants accounting for more than 90% of daily transaction volumes. While the base program remains free to join, the company introduced a paid loyalty tier (ELITE) in late 2022. From a financial perspective, ELITE members typically generate higher-dollar receipts with greater frequency, with related fees providing recurring/high-margin revenues.
d. While Canna Cabana remains the largest retail cannabis retailer in Canada (~12% market share), the industry remains highly fragmented, implying ample room for growth. Furthermore, market shares continue to roll up to diversified/scale-enabled players, and we look for HITI’s market share to reach 15% in relatively short order.
e. Finally, increasingly leveraging white labeling opportunities to further build out the house-branded product portfolio and ongoing cannabis accessories innovation likely enhances growth and margins over time.
3. Transitioning into a global player: Earlier this month, HITI closed the acquisition of a 51% ownership stake in Remexian Pharma GmbH, a leading low-cost medical cannabis importer/wholesaler in Germany, for €26.4 million ($31.1 million). Stepping back, Germany remains amongst the highest-growth markets in the world, particularly following the enactment of the Consumer Cannabis Act in April 2024, which legalized cannabis for medical use. Much of the accelerating demand continues to be satisfied through imported cannabis, particularly from Canada. A key rationale for the transaction was the powerful opportunity to increasingly leverage HITI’s procurement expertise and LP network/relationships in Canada to drive accelerating imports/sales in Germany. As such, we see substantial potential for related revenue/EBITDA growth, as HITI increasingly pushes Canadian-supplied cannabis (sourced at lower prices) through Remexian’s broad distribution network in Germany.
4. Building earnings power: While our model calls for modest net losses through the end of HITI’s current fiscal year ended October 31, 2025, we project a favorable inflection next year, as EPS hits $0.09 in F2026, with further growth expected in F2027 and beyond as the business continues to scale. Key modeling inputs include accelerating revenue growth reflecting continued organic growth, a broader retail store footprint, and accelerating Remexian contributions, combined with rising margins on the back of building economies of scale, ongoing expense management/resource optimization, and accelerating growth across higher-margin initiatives.
Looking longer-term, we see a clear pathway for HITI reaching a $900+ million of revenue run-rate over the next five years after factoring in seemingly conservative assumptions around organic growth for the legacy business, new store openings, and accelerating growth at Remexian. Turning to profitability, our math suggests EBITDA approaches $90 million within five years based on rising economies of scale, ongoing resource optimization, and a more favorable business mix along with stepped-up sourcing capabilities, a more favorable supply mix, and better procurement terms for Remexian.
5. Balance sheet strength: To be sure, High Tide’s strong balance sheet remains a key differentiating factor relative to most other U.S.-based cannabis operators that typically struggle to source capital to fund growth due to regulatory restrictions, with highly-dilutive financings often the only course of action. Put another way, the company maintains ample liquidity and steady free cash flow to fund organic growth initiatives and capitalize on accelerating consolidation trends across the industry should the right opportunities arise. Turning to the liabilities side, High Tide’s debt profile remains generally favorable, with long-dated maturities. Moreover, we put HITI’s gross debt-to-LTM Adjusted EBITDA ratio at approximately 1.5x based on ~$48 million of debt (inclusive of the $9.0 million Remexian loan) and our Adjusted EBITDA estimate through July 31, 2025, or well below leverage ratios for most peers.
6. Valuation – misperception creates opportunity: Despite the stock’s more recent outperformance, our DCF-derived price target of $6.00 still suggests a considerable disconnect between HITI’s fundamentals and the stock’s current price. As a crosscheck, we looked at peer valuation multiples to corroborate our DCF-based price target. To be sure, while apples-to-apples comparisons for cannabis stocks remain challenging given varying regulatory backdrops and growth prospects across countries/states/provinces, not to mention diverging capital, liquidity, and profitability profiles, HITI continues to trade at a discount to most U.S.- and Canadian-based cannabis companies based on Enterprise Value (EV)-to-EBITDA multiples despite what we would argue are well-defined competitive advantages around scale, growth, profitability, and balance sheet metrics, as well as a more favorable regulatory backdrop. Taking it a step further, we would argue a more relevant comp group for HITI remains “blue-chip”/high-performing retailers, irrespective of the underlying sales mix. In spite of higher sales per square foot metrics relative to best-in-class retailers, HITI shares still trade at a fraction of the EV/EBITDA multiples most leading retail stocks command.
Stepping back, while sentiment on the cannabis sector here in the U.S. has certainly improved following President Trump’s more recent comments indicating his administration was considering reclassifying marijuana as a Schedule III drug, absolute/relative performance of most U.S.-based cannabis company stocks remains inextricably linked to the prevailing narrative around potential regulatory reform in the U.S. In contrast, we look for HITI’s strong/improving fundamental story to increasingly resonate with (generalist) investors, thereby driving a material upward revaluation for the stock regardless of the regulatory backdrop.
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