By Thomas Kerr, CFA
NASDAQ: HITI
READ THE FULL HITI RESEARCH REPORT
1st Quarter 2026 Financial Results (C$)
On March 17, 2026, High Tide (NASDAQ: HITI) reported 1st Quarter 2026 financial and operating results, which showed strong reported revenue growth of 25%, largely due to recent acquisitions. Same-store sales slowed to 0.5% due to unusually harsh weather conditions in parts of Canada as well as an overall industry slowdown. We believe the company can still grow SSS in the low-mid single range going forward, absent any extraordinary events.
Gross profit reached a record $44.4 million in the 1st quarter ending January 31, 2026, increasing 25% year over year and 4% sequentially. Gross margin was 25%, flat from the prior year period and down slightly from 26% in the preceding quarter. In the core bricks-and-mortar segment, which accounted for 84% of revenue, gross margins improved sequentially for the 5th straight quarter to 28%. Margins in the medical cannabis distribution segment were pressured by the liquidation of older biomass in Portugal at lower-than-normal prices due to limited remaining shelf life. The company expects margins in that segment to improve beginning in the 2nd fiscal quarter of 2026 as lower-cost biomass sourced from Canada begins moving through the supply chain.
Adjusted EBITDA was $11.5 million (6.4% margin) in the 1st quarter compared to $7.1 million (5.0% margin) in the prior year period, marking the fastest growth rate in eight quarters.
During the first quarter, the company generated a net loss of ($0.4) million, which represented strong improvements from a net loss of ($2.7) million in the prior year period and a net loss of ($46.7) million sequentially, which was impacted by non-cash impairment expenses and charges related to changes in derivative liabilities.
The company generated $2.9 million in free cash flow in the 1st quarter, representing a significant improvement from a cash flow usage of ($1.9) million in the prior year period. During the past four quarters, the company has generated $16.8 million in free cash flow.
Valuation
We are maintaining our DCF-derived price target of US$5.00 per share, which still represents meaningful upside from current price levels. While many cannabis stocks do tend to move together in response to major industry-wide catalysts (such as rescheduling), we believe there can be major divergence in specific companies based on specific fundamentals. High Tide is likely one of those positive outliers due to a potential recovery of Canadian same-store sales growth to normal levels, successful new store openings, continued margin improvement, and a successful expansion into European markets.
We also look at peer multiples to provide a secondary valuation methodology. Although it’s difficult to find exact comparisons due to a variety of business models, country location, and financial data – we believe a set of cannabis-related stocks are trading at an EV/EBITDA ratio of approximately 9.2x. With HITI trading at only approximately 6.2x EBITDA, there appears to be material upside. HITI stock would have to reach approximately US$3.20 per share to match its peer valuation, many of which do not have the strong growth profile and competitive advantages that High Tide does.
Another competitor comparison is Charlotte’s Web (OTCQB: CWBHF), which has performed very well since the executive order from the White House on 12/18/25 that opened the door to a pilot program where seniors could get up to US$500 a year of CBD covered under Medicare. High Tide owns NuLeaf and FAB CBD products, which compete with Charlotte's Web, so the company is not getting credit for that potentially large opportunity.
In addition, Canadian-based Organigram Global recently acquired Germany-based Sanity Group, a competitor to Remexian. The Sanity Group acquisition is roughly the same size as High Tide’s purchase of Remexian in terms of revenue (Remexian is more profitable), but Organigram is paying substantially higher multiples than High Tide did (believed to be over 12x). This demonstrates High Tide’s European business is truly an undervalued and unrecognized asset.
Estimates
We adjust our estimates based on management comments and industry conditions. Our updated model calls for EPS of $0.05 in fiscal 2026. Our fiscal year 2027 EPS estimate is now $0.13.
We expect consistent double-digit revenue growth over the next 2-3 years, with revenues exceeding $800 million in F2027. This reflects continued organic growth (rising same-store sales and ongoing market share gains), a broader retail store footprint (store count likely approaching 300), and accelerating Remexian contributions, particularly as supply chain disruptions in Portugal continue to normalize and the company’s distribution footprint expands beyond Germany.
We expect Adjusted EBITDA, which excludes transaction costs, other non-recurring items, and stock-based compensation expenses, to be approximately $49.0 million in F2026 and expand to $59.0 million in F2027. This growth in 2026 and 2027 is driven by a step up in gross margins following the sell-through of older/lower-priced product, rising economies of scale, higher levels of white label products, and ongoing expense management & resource optimization strategies. Management has stated the company’s long-term EBITDA margin goal is 12.0% for HITI’s bricks-and-mortar business segment (9.4% in F4Q25).
Key Investment Points
High Tide is the largest cannabis retailer in Canada, operating 220 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. More recently, 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 demand satisfied through imported cannabis from Canada.
Our investment thesis revolves around:
- We expect a continued favorable regulatory landscape in Canada. 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 coming from the five provinces in which High Tide has operations.
- While HITI’s brick-and-mortar cannabis sales remain confined to Canada at present, we expect management to increasingly turn its sights to the U.S. in light of a more favorable regulatory backdrop. As uncertainty around rescheduling probabilities, implications, and timelines fade, we look for cannabis stocks to benefit from enhanced liquidity, rising institutional shareholder ownership profiles, and powerful upward revaluations over time.
- We believe there are plenty of growth levers the company can engage in. We expect 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) strong/sustained Same-Store Sales (SSS) growth;
b) ongoing retail store expansion, with management reiterating the company’s goal of adding 20-30 new stores per year;
c) further step-ups in the number of Cabana Club/ELITE loyalty program memberships;
d) market share continuing to roll up to diversified/scale-enabled players; and
e) increasingly leveraging white labeling opportunities to further build out the house-branded product portfolio. Currently, this is less than 2.0% of total sales, but the company’s target is for these products to represent 20% of sales. Gross margins on this product portfolio are typically 5%-7% higher than the legacy product set.
- High Tide has emerged as a global player in the industry. HITI recently closed the acquisition of a 51% ownership stake in Remexian Pharma GmbH, a leading low-cost medical cannabis importer/wholesaler in Germany. 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. 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 and EBITDA growth, as HITI increasingly pushes Canadian-supplied cannabis (sourced at lower prices) through Remexian’s broad distribution network in Germany.
- We project a favorable inflection in net income in fiscal year 2026 (October 2026), with further growth expected in fiscal year 2027 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.
- 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, and highly dilutive financings are often the only course of action. 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. High Tide’s debt profile remains generally favorable, with long-dated maturities (mostly 2028). The debt to EBITDA ratio is 1.4x based on gross debt as of 1/31/26 and 1st quarter annualized attributed EBITDA. This demonstrates the company has ample debt capacity to fund its growth plans if necessary.
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