High Tide (HITI) (TSE: HITI) operates as a counterculture chain that manufactures and sells cannabis accessories. The firm operates through its Wholesale and Retail business segments. Its brands include Famous Brandz, RGR, Smoker’s Corner, Canna Cabana, KushBar, and Kush West.
The company recently reported earnings for its second quarter, achieving its ninth straight month of positive adjusted EBITDA at C$2.4 million. Despite this, the stock is down nearly 8% today, as investors don’t seem excited about the earnings report.
Earnings per share came in at -C$0.14, which was below analysts’ consensus estimate of -C$0.07. In the past nine quarters, the company has missed earnings estimates six times.
Nevertheless, High Tide saw strong revenue growth of 98% year-over-year, with revenue hitting C$81 million compared to C$41 million. In addition, same-store sales increased 23% quarter-over-quarter.
However, gross profit only increased 51%, meaning that the company hasn’t demonstrated that it has operating leverage. Indeed, its gross margin has contracted from 37% to 28%. The drop in gross margin was caused by a higher mix of brick-and-mortar revenue.
Investor Sentiment
The sentiment among TipRanks investors is currently very negative. Out of the 532,948 portfolios tracked by TipRanks, 0.2% hold High Tide. However, in the last 30 days, 2% of those holding the stock decreased their positions.
Likewise, 0.5% of TipRanks portfolios decreased their holdings in High Tide in the past seven days. The stock’s sentiment is below the sector average, as demonstrated in the image below:
Analyst Recommendations
High Tide has a Moderate Buy consensus rating, based on one Buy and one Hold assigned in the past three months. The average High Tide price target of C$11.53 implies 323.8% upside potential.
Final Thoughts
High Tide saw a strong quarter, as revenue almost doubled year-over-year. However, earnings per share fell short of estimates. Thus, High Tide may not be the best investment in the current market environment.
