Shares of cannabis accessories maker High Tide (HITI) have doubled in 2021 despite pulling back significantly – like the majority of cannabis stocks – from the year’s early highs.
However, Echelon’s Andrew Semple expects the stock to claw back those gains and some. The analyst reiterated a Speculative Buy rating on HITI along with a C$18.00 ($14.57) price target. Investors could be sitting on returns of ~140%, should his thesis bear fruit over the next 12 months. (To watch Semple’s track record, click here)
Semple’s latest endorsement follows two recent developments.
On Monday, the company disclosed that it has established a credit agreement worth up to $25 million with ATB Financial. The facility consists of $10 million to be available initially, and subject to certain conditions, an additional $15 million. The initial drawdown is anticipated before the end of the month, while the interest rate is expected to be less than 6% per year. As such, Semple views this as a “much cheaper cost of debt than what has been available to High Tide previously.”
“We view this announcement positively,” the 5-star analyst added, “Providing High Tide with additional funding to pursue its pipeline of M&A transactions.”
Not that the company is waiting for the extra cash to pursue such opportunities. Following on from 4 previous global e-commerce related acquisitions this year, on Tuesday, the company announced that it had concluded the purchase of Blessed CBD. High Tide has acquired an 80% interest in the UK-based CBD online retailer for £9.06 million (~C$15.5 million). The company also has a 3-year option to buy the other 20% at 2.2x TTM revenues.
Blessed is one of the UK’s most popular direct-to-consumer CBD brands and notched almost 5 million visits to its website last year. The company’s offerings include gummies, creams, oils and capsules.
Semple is even more enthusiastic about this latest move, calling it a “gem of an acquisition, and the right strategic and operational fit.” Even better, Semple considers the price paid as “excellent.”
“We believe this is an exemplary transaction of the accretive M&A opportunities available in High Tide’s pipeline, with the Blessed CBD transaction valued at just 4.0x TTM EV/EBITDA,” the analyst buoyantly summed up.
Overall, two other analysts have recently thrown the hat in with HITI reviews, and they are both overwhelmingly positive, providing the stock with a Strong Buy consensus rating. The average price target is a bullish one, too; at C$17.12 ($13.86), shares are expected to appreciate ~132% over the one-year timeframe. (See HITI stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
