Baked In
Posts
🗞️ Yesterday Was Rough 🗞️

🗞️ Yesterday Was Rough 🗞️

Anthony Varrell
June 14, 2024

GM Everyone,

Yesterday was one of those days for the cannabis sector. We saw everything in the red, paired with several negative headlines, which then led to most of the participants in the sector having a meltdown. Take a deep breath and relax. You'll be fine. The underlying of MSOS is trading around 14% of their average volume, and we are smack in the middle of the comment period for rescheduling, which, if you had half a brain, you would have thought this kind of action on the tape was going to happen.

See you all on the livestream at 11am to commiserate together.

Today’s letter can be read in 9 minutes and 26 seconds.

What's Driving the Market Today?

Stock futures are down across the board, here is what traders are focused on today:

Russia outlines conditions for peace talks with Ukraine.
French stocks drop 4.5% amid political uncertainty.
Yen weakens as BOJ delays policy changes.
U.S. consumer sentiment survey release awaited.
Argentina inflation slows, IMF approves $800M aid.

💸 High Impact

The Tide Has Risen

The What - High Tide (Nasdaq: HITI) reported their Q yesterday, and they basically outperformed on every metric. In a Canadian market where operators are failing daily—Indiva filed for creditor protection yesterday—they are thriving. Raj Grover sold us all on his vision to build High Tide into the premier cannabis retailer in Canada, and he’s doing just that.

For starters, they produced $9.4 million in record free cash flow, bringing the grand total for the last 4 quarters to $22.7 million. As of this quarter, they are the highest-grossing Canadian cannabis company in terms of revenue generated by the sale of cannabis. Not surprising for a company that has a 10.9% market share of the Canadian retail market. They are marching straight towards their goal of 15% overall market share, as this quarter yet again displayed solid growth.

"On top of achieving net profitability and record free cash flow, our Cabana Club continues to expand and remains the largest bricks-and-mortar loyalty program in Canada with 1.43 million members. I am thrilled to see ELITE memberships again grow at the fastest rate since inception, increasing 226% versus last year and 38% sequentially, demonstrating the popularity of our innovative discount club model.”

The membership model seems to be working for High Tide as these numbers keep growing, with a 38% year-over-year growth in club members and a 226% year-over-year growth in ELITE members. Something is working.

My .02 - When you hear “Canadian cannabis retail,” you don’t really think of it as a sexy business, as we have been put through the ringer and the Canadian market had a black cloud over it for years. Well, that has changed. High Tide has built a recipe that cooks in terms of growth and revenue generation, paired with a CEO who actually does what he says he’s going to do. Raj and the team at HITI just put out yet another impressive Q, and I can assure you the buck won’t stop here.

Earnigns PR: https://www.prnewswire.com/news-releases/high-tide-reports-second-quarter-2024-financial-results-featuring-record-free-cash-flow-of-9-4-million-and-positive-net-income-302172367.html

📈 Dog Walkers

New Hampshire Died Vs Lived Free

Yesterday, HB 1633 got tabled in the New Hampshire House, signaling a no-go for adult use cannabis in the Live Free or Die state. Go figure. The good news is this was a highly flawed bill at its core, and now, years down the road when this is put back in play (yes, years), there can be sensible legislation that best represents the people's interests. A state-controlled “franchise" model is never a good thing in my book. Period.

Marijuana Banking Gets Stripped

The marijuana banking provisions that Rep. Dave Joyce placed within the most recent appropriations bill have been stripped out. Gutted. No more. Sent to the scrap heap. We are now back to square one and looking at none other than the #SAFE Banking Act yet again, hoping to get a standalone vote sometime this millennia. Chuckles surely isn’t doing us any favors anytime soon. But hey, let’s just keep stacking co-sponsors like infinity stones.

Wine & Spirts Wholesalers of America Have Our Back?

The WSWA wrote a letter to the chairs and ranking members of the U.S. House and Senate committees on Agriculture, emphasizing elevating synthetic intoxicating hemp products to a “public health crisis.” Go figure, the hemp beverage opportunity has the knives out over at the liquor lobby to deal with the synthetic gas station products we have been worried about for months. And yes, I believe it is the power of hemp beverages that are forcing their hands to act.

🔢 Number O.T.D.

C$124,200,000

That is the number that High Tide reported for the quarter yesterday. Bravo Raj. We will be breaking down the earnings on the livestream at 11am today and will have Raj on next week for a full dive into the rest of the year for $HITI.