High Tide Inc. (HITI): A Discounted Opportunity in the Cannabis Retail Sector

The cannabis retail sector, long plagued by volatility and regulatory uncertainty, has begun to stabilize as markets mature and consumer demand solidifies. Amid this backdrop, High Tide Inc. (HITI) stands out as a rare combination of strategic dominance, improving profitability, and a compelling valuation. For investors seeking a long-term play in the sector, High Tide's market-leading discount model, expanding membership base, and international expansion plans position it as a compelling buy-at-a-discount opportunity.

Strategic Dominance: The Power of the Discount Model

High Tide's Canna Cabana brand operates 200 retail locations across Canada, making it the largest cannabis retail chain in the country and the second-largest globally. Its discount club model, launched in 2021, has been a game-changer. By offering tiered membership benefits—ranging from the free Cabana Club to paid ELITE memberships—the company has driven customer retention and average spending. As of Q2 2025, Cabana Club membership in Canada has surged to 1.9 million, a 33% year-over-year increase, while ELITE members have grown by 120% to 97,000.

This loyalty program has translated into tangible financial results. Daily same-store sales rose 6.2% year-over-year in Q2 2025, the fastest growth in five quarters. Canna Cabana's 12% market share in the five provinces it operates in (up from 11% in 2024) underscores its dominance. The company's $1,648 annualized retail sales per square foot—surpassing retailers like Wal-Mart and Target—further highlights its operational efficiency.

Improving Profitability: EBITDA Growth and Free Cash Flow

Despite a net loss of $2.8 million in Q2 2025, High Tide's adjusted EBITDA reached $8.1 million, marking the 21st consecutive positive quarter. This represents a 14% sequential increase, even in a seasonally slower period. The company's free cash flow also improved dramatically, jumping to $4.9 million in Q2 from a negative $1.9 million in the prior quarter.

While gross profit margins dipped to 26% due to the expansion of the Cabana Club program, the core bricks-and-mortar segment saw a 1% sequential improvement in margins. This resilience, coupled with $34.7 million in cash and $25.4 million in debt (equivalent to 0.8x EBITDA), positions High Tide to fund its aggressive expansion plans without diluting shareholders.

Favorable Valuation: A Discounted Market Leader

High Tide's valuation metrics are strikingly attractive. With a Price-to-Sales (P/S) ratio of 0.6x, it trades at a significant discount to the cannabis industry average of 2.3x and the Canadian pharmaceuticals average of 1.0x. Analysts have set a consensus 12-month price target of CA$7.33, implying a potential 70% upside from its current price of CA$4.25.

The company's $550 million in trailing revenue and $1.7 billion in Canadian cannabis sales to date further justify its valuation. At a 0.6x P/S ratio, High Tide is trading at a fraction of its intrinsic value, especially when considering its strong balance sheet, growing membership base, and international ambitions.

Expansion Potential: Canada and Beyond

High Tide's long-term goal of 300 Canadian stores is well within reach, with 20–30 new locations planned for 2025. Its recent acquisition of Remexian Pharma GmbH in Germany marks a strategic entry into the European medical cannabis market. Germany, which imports half its medical cannabis from Canada, offers a natural extension of High Tide's supply chain expertise.

The company is also preparing for potential U.S. federal reforms. Its e-commerce platform, which generates 3% of revenue, is designed to scale rapidly if cannabis legalization expands. With $1.648 in sales per square foot and a 0.3% shrink rate (a testament to inventory control), High Tide's operational model is primed for replication in new markets.

Investment Thesis: A Buy-at-a-Discount Opportunity

High Tide's combination of strategic dominance, improving profitability, and favorable valuation makes it a standout in the cannabis sector. While the company faces challenges—such as margin pressures from loyalty program expansion and regulatory risks in international markets—its financial strength, brand loyalty, and expansion pipeline mitigate these concerns.

For long-term investors, High Tide offers a rare opportunity to invest in a market leader at a discount. With a P/S ratio of 0.6x, $34.7 million in cash, and a 70% upside implied by analysts, the stock is undervalued relative to its growth potential. As the cannabis sector matures and international markets open, High Tide is well-positioned to capitalize on its first-mover advantage and operational excellence.

Conclusion: High Tide Inc. (HITI) is a compelling long-term investment for those seeking exposure to the cannabis retail sector. Its discount model, growing membership base, and expansion into Germany and the U.S. position it as a rare buy-at-a-discount opportunity in an undervalued but high-growth industry. Investors who act now may benefit from both near-term margin improvements and long-term market expansion.