$RKLB (-1,01 %)

Citi has raised the price target for RocketLab from $22 to $35 and continues to maintain a Buy recommendation as a preview to the Q4 results in February.

Additionally, Trump said his administration will work to put US astronauts on Mars. "We will continue to pursue our goal of conquering the stars and sending American astronauts to the planet Mars," he said. The entire space sector should continue to benefit from this.

Source:

https://www.tipranks.com/news/the-fly/rocket-lab-price-target-raised-to-35-from-22-at-citi

Hello everyone!

Since I explained the company Rocket Lab USA in detail in my first big post a week ago $RKLB (-1,01 %) in my first big post and the post has been so well received with currently 8,000 views and more than 50 likes, I would now like to write another short version.

1.

Today's space industry could be compared to the early days of the internet. It is at a pivotal point in its development, with major advances being made every week around the world.

The global space economy is expected to grow to $1.8 trillion by 2035, up from $630 billion in 2023.

These developments will help tackle some of the world's biggest challenges, such as:

• Climate change
• disaster relief
• global communication gaps
• agricultural efficiency

Companies like $RKLB (-1,01 %) are at the forefront, providing essential launch services and developing new technologies to drive both space exploration and commercialization.

2.

So where does this enormous value come from?

The projected value of the space economy comes from three main segments:

- Launches: reliable and cost-effective launch services are the backbone of any space operation. Companies like $RKLB (-1,01 %) make it possible to launch satellites, cargo and ultimately people into orbit. Their efficiency and cost reduction will be crucial for the growth of the industry and the democratization of access to space.

- Spacecraft/satellites: Once in space, these assets provide essential functions - from communications and navigation to imaging, scientific research and much more. The demand for new satellites is growing as companies from various industries invest in satellite networks to support their services. $RKLB (-1,01 %) The technology behind satellites also plays a key role in this area, but I'll come back to that later.

- Data and services: The largest and fastest growing segment. The information collected in space has applications in agriculture, climate science, disaster relief, logistics, finance and many other areas. Data and insights from space will drive innovation in AI and turn raw data into actionable insights that will power countless industries.

Ultimately, while launch services and satellites are critical, it is the market for data and services that offers the greatest potential. This segment is expected to account for a significant portion of the projected $1.8 trillion space economy.

3.

Most immediately think, "Why invest in $RKLB, a 'launch company' when the real value is in space data and services?"

And with that, it's time to address the most common misconceptions about the company - $RKLB is not just a 'launch company', but a company for the entire space sector 👇🏻

Of course, they are industry leaders in rocket launches - Electron for small launches and the upcoming Neutron to enter the medium launch capacity market - but that's only part of what they do.

Founder and CEO of $RKLB, Peter Beck, explains how the company is tackling the three key areas of space that I'll detail in a moment:

- The ride: the first step is getting to space, and $RKLB has mastered this with their Electron rocket and will soon succeed with Neutron, which will capture the medium launch market.

- The tools: Once in space, the real work begins. $RKLB doesn't just send things up - they also provide the spacecraft, components, software and ground systems necessary to make missions in orbit successful. They are already delivering this for commercial and government customers.

- The data and services: This is where the long-term value lies. By owning both the launch and spacecraft side, $RKLB can develop and deliver space capabilities like constellations without the delays and costs that other companies have (just like SpaceX did with Starlink). This positions them for long-term, recurring revenue at a high margin.

In short, $RKLB's vision goes far beyond rocket launches - they are building the infrastructure for a complete space ecosystem. This broader vision is critical to understanding their current and future successes.

4.

Let me dive into each part, starting with the launches.

Here we have both small and medium sized startups.

As the clear leader in small launches, $RKLB's Electron offers unique capabilities and has completed over 50 successful missions. With a price tag of about $8 million (up from about $5 million in 2017), Electron has played a critical role in access to space by enabling more companies to affordably launch their payloads. It is the fastest commercially developed rocket to reach 50 launches - and it is on track to be the fastest to reach 100.

The upcoming Neutron medium-lift rocket aims to break SpaceX's monopoly in the category and represents a significant growth catalyst for $RKLB (it is expected to be operational by mid-2025).

$RKLB's track record with Electron underscores its expertise in building reliable, market-leading rockets. By working closely with customers, $RKLB has tailored Neutron specifically to the needs of the industry. With Electron's success as a foundation, Neutron is expected to be equally successful and offers the company a compelling advantage.

With a launch price of approximately $60 million, Neutron will be a key driver of $RKLB's revenue growth and will transform the company's position in the launch market.

But Neutron's importance goes far beyond its potential commercial and government customers. I will discuss this later.

5.

The spacecraft side is also mostly complete, with only a few details missing. Many people don't realize that the Space Systems segment accounts for more than two-thirds of the company's revenue and grew more than 80% year over year last quarter.

The success of $RKLB with the Electron rocket paved the way for significant expansion and diversification. From 2020, the company expanded its focus beyond launch services to build a comprehensive range of space-related products to strengthen its position in the industry.

An important milestone in this realignment was the launch of $RKLB's spacecraft division. In 2020, $RKLB launched the Photon satellite platform, marking its entry into the spacecraft sector. Photon offers a complete satellite solution covering design, manufacturing and operations. This expansion transformed $RKLB from a launch provider into a full-service space company.

The company's expansion into space systems was not just limited to internal developments, but was actually strongly driven by a series of strategic acquisitions.

In 2020, they acquired Sinclair Interplanetary, adding expertise in satellite components such as reaction wheels and starfinders. This was followed by the acquisitions of Advanced Solutions and Planetary Systems in 2021, which improved mission simulations, flight software and spacecraft separation. In early 2022, the purchase of SolAero Holdings brought advanced solar cell manufacturing for space applications, and the acquisition of SailGP Technologies added key facilities in New Zealand.

By combining internal innovations such as the Photon platform with strategic acquisitions, $RKLB has positioned itself as a major player in both the launch and space systems markets, significantly expanding its service offerings and increasing its competitiveness.

It is important to note that $RKLB would already be cash flow positive with just Electron and the Space Systems segment (excluding the development costs of Neutron).

6.

Let's talk about space data and services:

$RKLB is very close to completing its full space ecosystem that will allow it to tap into this market, similar to what SpaceX did with Starlink.

The final piece of the puzzle is Neutron, which will complete the company's ability to build any spacecraft it needs, launch it on demand and deploy constellations at scale and at low cost.

There are numerous applications and business models enabled by the deployment and operation of spacecraft or satellite constellations. Once $RKLB completes its full space ecosystem, it will be able to pursue several opportunities.

Initially, I didn't fully understand the breadth of these applications, but they include services such as satellites providing imaging and data collection for agriculture, environmental monitoring, disaster management and defense; satellite communications with advances in real-time connectivity for IoT devices, autonomous vehicles and global networks; and the development of on-orbit manufacturing for specialized materials that can only be produced in a zero-gravity environment (such as high-precision optics, pharmaceuticals or even semiconductors). There is also the potential to outsource data storage or computing power to satellites in space, which offers multiple benefits, as well as space debris management services - a growing problem as the sector evolves - among many other potential applications.

One notable example: $RKLB has already built a spacecraft for pharmaceutical manufacturing in space with Varda Space Industries.

7.

The CFO of $RKLB on the market for orbital services and the company's approach 👇🏻

"The application market is highly fragmented, with many different verticals and successful business models in each of them. For example, earth observation has different layers.

The largest target is communications, the largest market. Even within communications, there are numerous opportunities for new services for consumers, businesses and governments.

We are not going to focus on just one area. We will enter multiple parts of the market and make multiple strategic bets. We plan to avoid the problems constellation operators face today by designing and manufacturing our own spacecraft, launching them with our rockets and operating them in orbit. This integrated approach allows us to focus on maximizing data management for our customers.

Ultimately, we will choose applications with significant scaling potential. We are not interested in small business applications, but are targeting opportunities that can generate hundreds of millions of dollars in revenue, or hopefully much more."

(Adam Spice, Chief Financial Officer of $RKLB (-1,01 %) )

8.

Now that you understand the full picture of $RKLB and its ambitions, let me touch on some of the competitive advantages the company has over its peers.

1) Peter Beck (CEO)

Peter Beck's leadership has been instrumental in transforming $RKLB from a small startup to a major player in the space industry. His vision, creativity and hands-on approach have driven the company's growth and positioned it for future success. Peter Beck is a self-taught engineer and a key player in the industry.

2) Capital efficiency

$RKLB excels at developing rockets at a lower cost than the competition. Their development process allows for early identification and resolution of problems, avoiding costly rework later. The experience gained from the successful Electron program allows them to build fully operational engines like Archimedes (used for Neutron) without relying heavily on pre-testing. This strategy allows $RKLB to launch rockets faster and cheaper than any competitor.

3) Vertical integration

$RKLB's vertical integration is a significant advantage, as exemplified by the Electron rocket, which consists of 66,000 parts, most of which are 3D printed. This optimized manufacturing process increases efficiency and reduces costs. In addition, vertical integration ensures strict quality control of components, which is crucial for safety and performance in the aerospace industry. Overall, this gives $RKLB a significant edge over the competition.

4) End-to-end solutions

As Peter Beck mentioned, the space industry has traditionally been divided into segments. $RKLB aims to become the most complete end-to-end space company, with the potential to challenge SpaceX in the next decade.

For even more in-depth analysis, feel free to re-read my previous post, which was much longer and more in-depth.

I currently hold about 90% of my total portfolio in $RKLB (-1,01 %) and can therefore sleep very peacefully. Even if the share price currently seems too expensive for many, I believe that you can still buy the share very cheaply today.

Today (January 7, 2025) we have reached the 30 dollar mark for the first time and thus a new all-time high.

I think we will be at least at 50$ per share by the end of 2025, depending on how the test of the Neutron rocket goes. Some are also predicting 100$ per share, but I don't want to speculate that far yet. I would rather remain conservative.

Of course, this is not investment advice.

$HITI (+0,87 %)

I haven't heard much about this stock here and, to be honest, I haven't really been interested in the cannabis stock sector so far - but now I'm in the process of building up the company alongside Rocket LAB USA $RKLB (-1,01 %) as my 2nd largest position.

The stock has already gained about +100% last year, but I firmly believe that this is just the beginning.

Background - How $HITI (+0,87 %) became the leading cannabis retailer in Canada 🥇

The beginning:

Raj Grover, the founder and CEO, who owns about 9% of the company, comes from a family of entrepreneurs and had already had success with several smaller companies before he $HITI (+0,87 %) founded the company. During a business trip to India, while looking for opportunities in fashion accessories or body jewelry, Raj came across the potential of cannabis consumption accessories. He shipped $10,000 worth of accessories from New Delhi to Canada and sold everything overnight. After repeating this success a few more times, Raj decided to open a store. This marked the beginning of the High Tide story.

In 2009, Raj opened Smokers' Corner with an initial investment of less than $50,000 and grew it into a multi-million dollar empire. At the time, there were only two or three competitors with less appealing businesses. Raj felt that by creating a differentiated business in a smart location, he could easily gain market share, and he was right. By leveraging his established roots in Indonesia, Thailand, China and India, he was able to not only provide a better customer experience, but also offer much more affordable products.

(Raj Grover, CEO of $HITI (+0,87 %) )

The legalization of cannabis in Canada:

Always striving to be one step ahead, Raj jumped at the opportunity when the Canadian Prime Minister announced that cannabis would soon be legalized for recreational use. With an existing customer base, it was only logical for Raj to expand into selling cannabis himself. He realized that if he only sold accessories, he would eventually lose customers to stores that offered both cannabis and accessories.

After nine years of focusing on consumable accessories and accumulating nearly $10 million in retained earnings, Raj raised $18.5 million for the first time in 2018 and ventured into the equity markets, marking the beginning of $HITI (+0,87 %) 's journey as a listed company. With easier access to capital compared to its peers, High Tide expanded its footprint across Canada, highlighting the significant acquisition of its competitor Meta in 2020, which increased the number of stores from 37 to 67.

The strategy shift that changed everything:

At the same time $HITI (+0,87 %) began acquiring e-commerce companies that sold accessories and CBD products (mainly oils) with higher margins - a crucial decision for the company. From the acquisition of several brands in the US, such as Smoke Cartel, FABCBD, Daily High Club, DankStop and NuLeaf Holdings, to the later acquisition of BlessedCBD in the UK, High Tide used its market power to increase margins and diversify revenue streams.

In the summer of 2021 $HITI (+0,87 %) was accepted for listing on the Nasdaq, representing a significant milestone.

Later that year, a decision was made: High Tide introduced in October 2021 a discount club model for its retail stores. With consolidated margins higher than any competitor due to the aforementioned CBD-related acquisitions, High Tide was able to offer $HITI (+0,87 %) cannabis at remarkably low prices, attracting loyal members and quickly gaining market share.

Although this discount model initially involved selling cannabis at a loss, the move proved extremely successful. The market share of $HITI (+0,87 %) went from less than 5% to over 12% in less than three years, even though the company only accounted for about 5% of the total number of retail cannabis stores. Today, the rebate program has more than 1.55 million members and continues to grow each quarter (+41% year-over-year according to the latest report).

The first-of-its-kind rebate model was the deciding factor that $HITI (+0,87 %) made it the leading cannabis retailer in Canada. No competitor could match their prices, and Raj was targeting regular cannabis consumers who were very price sensitive.

Some of the closest competitors (e.g. Fire & Flower Holdings, Four20, Tokyo Smoke) went bankrupt after this price war. This shows how strong $HITI (+0,87 %) has become in this sector. And the market consolidation in Canada has only just begun.

This strategy has also significantly weakened the illegal market, which has further strengthened High Tide's market share.

Once market share was captured, it was time to become profitable:

While Raj sacrificed margins to achieve this, economies of scale and several initiatives to improve margins enabled it $HITI (+0,87 %) to return to positive free cash flow in 2023 (4.3% margin TTM in the last quarter) and positive net profit in the latest quarterly figures, with a consolidated leadership position that is stronger than ever.

Overall, High Tide took a calculated risk to become the market leader in the country and it proved to be extremely successful. This success was only possible thanks to the CEO's extensive experience in the sector and his deep understanding of the cannabis consumer, which surpassed the knowledge of any other management team.

What's next for $HITI (+0,87 %) what next?

• While the focus on achieving positive free cash flow led to a notable slowdown in revenue growth, the company is now returning to its growth strategy at a rapid pace. $HITI (+0,87 %) Despite the legalization of cannabis over five years ago, there is still significant market potential to be captured in Canada.

• A recent regulatory change in Ontario now allows a company to operate up to 150 recreational cannabis stores, doubling the previous cap of 75. This change benefits large retail chains such as $HITI (+0,87 %) Raj Grover. Raj Grover has outlined plans to open 20-30 stores in 2024 (29 were ultimately opened in 2024) to capitalize on the opportunity and address the high presence of the illicit market in the region.

• High Tide recently acquired a store for 1.5x last quarter's annualized adjusted EBITDA. The CEO mentioned that he is constantly receiving calls from independent operators who want an acquisition as it is their only alternative to bankruptcy. Every month, dozens of cannabis businesses close in Canada because they simply can't compete with $HITI (+0,87 %) compete.

• This year (2025), High Tide is expected to reach a 15% market share, up from 12% today.

• Given the potential opportunity over the next 2-3 years in Canada alone, the company expects to reach 300 stores and generate at least 76 million Canadian dollars in adjusted EBITDA, with strong free cash flow.

$

• It's worth noting that these estimates are conservative, as Raj always follows the philosophy of promising less and delivering more.

Looking at this chart, one might ask: "How does Raj return $HITI (+0,87 %) return to its high velocity growth strategy when growth has been essentially flat in recent quarters?"

Well, the growth in the number of stores is still offset by the following:

1)

Overall retail cannabis sales in Canada have declined due to macroeconomic conditions and a slight resurgence of the illicit market in certain areas (as mentioned in the last quarterly report). Despite these challenges $HITI (+0,87 %) continued to gain market share and even accelerated the pace at which it is expanding its market share as independent operators struggle to compete with prices in the illicit market. Therefore, its growth remains positive rather than negative. Importantly, recent data suggests that Canadian retail cannabis sales have begun to recover, providing a potential tailwind for future revenues.

2)

While brick-and-mortar stores have grown under these conditions, the company's e-commerce segment (which sells CBD oils, consumer accessories, etc.) has been underperforming for some time. This has kept the company's overall growth nearly flat. Excluding this segment, sales of $HITI (+0,87 %) increased by 10 % year-on-year in the last quarter. These CBD brands were critical to sustaining the initial launch of the company's discount club model in brick-and-mortar stores a few years ago. However, they are now a hindrance and are offsetting the growth of the core business. At this point, the e-commerce segment only accounts for 6.5% of total sales, so its influence is bound to diminish. Therefore, I am not worried. It is also important to note that Raj Grover recently said that $HITI (+0,87 %) is preparing to launch "an exciting and innovative set of offerings" to accelerate the momentum in this segment.

Looking to the future, I expect that $HITI (+0,87 %) will achieve high single-digit growth over the next 2-3 years based on its presence in Canada.

$HITI (+0,87 %) has never been better prepared to replicate its business model internationally.

Germany might have been just around the corner. However, that is no longer the case. The German coalition has collapsed and new elections have been called, where the CDU could win.

My thoughts:

- The downside is that we have lost a major catalyst for the company's sales growth.

- However, there are some ways to look on the bright side:

1) This expansion was not priced in, so the stock is unlikely to react to this news. No analyst had included Germany in their estimates, so $HITI (+0,87 %) is still as undervalued as it was before this news.

2) The company will continue to focus on Canada, which is doing very well. There is also potential for expansion into the US if a re-rating occurs. Simultaneous expansion into Germany and the US would require more capital than the company $HITI (+0,87 %) can currently afford.

3) Although $HITI (+0,87 %) not expanding into Germany, no other company is doing so. The market will continue to exist, and perhaps in a few years we can enter with a much stronger foundation to support that expansion.

Ongoing developments in the USA could $HITI (+0,87 %) green light for expansion there.

There are significant changes in store for the US cannabis sector. The potential reclassification of cannabis from Schedule I to Schedule III could open doors for US cannabis companies to be listed on major exchanges like Nasdaq or NYSE, which would make it easier for institutional investors to get involved. The only reason High Tide hasn't entered the US market yet is to avoid jeopardizing its Nasdaq listing. This would finally open doors for the Canadian market leader.

Note: For those who don't know, US cannabis companies cannot be listed on the NYSE or Nasdaq, only on the OTC markets. Since $HITI only sells cannabis in Canada (and only offers CBD products or consumption accessories in the US), there is no problem. This is also one of the reasons why institutional ownership in the sector is so low.

High Tide, with its large e-commerce base of over 3 million US customers and profitable business operations, is poised to capitalize on these developments. Raj Grover's strategic approach as a second mover allows it to avoid pitfalls and strategically open stores in key states. The company is ready to build on its strong foundation and scale efficiently, with the goal of securing a significant market share with well-chosen locations and a clear expansion strategy.

Most US operators struggle to become profitable, even with gross margins in the 40-50% range, while $HITI is profitable in both free cash flow and net income, with a gross margin below 30%.

Although the company is not reliant on the US market for further growth, this provides an additional catalyst for its upcoming growth strategy.

Whether this expansion is rapid or not, these developments will attract a wave of new investors into the sector and contribute to an overall expansion of multiples.

Donald Trump

Since Trump's victory, there has been widespread panic about cannabis stocks. However, I believe this reaction is overblown and Trump is not bad for the sector at all.

Yes, Kamala Harris had promised to legalize marijuana if elected, so it's understandable why the market was betting on her victory. But when you get right down to it, the main catalysts for cannabis stocks remain cannabis reauthorization and the SAFE Banking Act. Back in September, Donald Trump publicly expressed his support for both developments.

Since his election, Trump has also made several pro-cannabis decisions within his team, including the appointment of Robert Kennedy Jr. as US Secretary of Health and Human Services and Chad Chronister as DEA Administrator. These decisions suggest that the policy environment under his administration may be more favorable for cannabis reform than many originally thought.

I believe cannabis stocks are at or very near the peak of pessimism, making this an excellent time to build a position.

to build a position.

However, most companies are not prioritizing the creation of shareholder value, with $HITI (+0,87 %) stands out among them. The company has shown strong relative performance following the US election, mainly because it is not reliant on new legislation to drive its growth and profitability. This resilience positions it well for the future, regardless of political outcomes.

High Tide becomes the Costco Wholesale $COST (+0,1 %) of cannabis!

The new paid membership further solidifies the position of $HITI (+0,87 %) as the market leader in Canada.

Following the success of its free discount model, which gained over 1.5 million members in less than three years, the$HITI (+0,87 %) i ELITE a paid membership with even better offers.

The launch started slowly, but membership is now growing at a record pace - 203% year-on-year in the last quarter. 🔥

It is remarkable that this growth is taking place while the subscription price is being increased.

Although the absolute number is still relatively small at 57,000, the conversion rate from regular Club members to ELITE members is improving every quarter. You only have to make a small purchase for the membership price to pay for itself - it's just like $COST (+0,1 %) .

In the last quarter, the proportion of ELITE members compared to regular members grew year-on-year from 1.7% to 3.7%.

The long-term vision is for High Tide to become the $COST (+0,1 %) of cannabis, generating strong and predictable cash flows and strengthening High Tide's competitiveness.

I believe this is one of the catalysts that will $HITI (+0,87 %) will help to further improve margins at the bottom line.

White label products will also play a critical role in improving $HITI's margins, but this will take time.

$HITI (+0,87 %) has a long-term goal of filling 20-25% of all in-store offerings with it.

This is an important catalyst that will contribute significantly to a gradual increase in gross margins.

The company is keeping margins stable, given the revival of the illegal market in Canada (more than 200 illegal stores have opened this year). This is the main reason for the overall decline in sales in the market. In areas where the illicit market has grown more, $HITI has recently reduced margins by 5-7% in order to remain competitive. However, this is not expected to be a long-term problem, especially as provincial governments begin to take action (e.g. a $31 million bill passed in Ontario to combat the problem).

The average revenue of a Canna Cabana store in the country in June 2024 was at an annualized revenue rate of $2.6 million compared to $1.0 million for competitors in the five provinces in which we operate.

- Average gross margin per store: 25%

- Average EBITDA margin per store: 12%

- Average cost of building a new store: USD 260,000

- Average amortization period: 10 months

This cost-effective model enables $HITI (+0,87 %) to expand organically by using its free cash flow instead of relying on external financing.

The same business revenues of $HITI (+0,87 %) have increased by 118% since the end of the 2021 financial year, when the discount club model was introduced.

In contrast, total sales in the five provinces in which it operates have increased by only 12% over the same period, meaning that the same store sales of the average operator have fallen by 21%.

High Tide's competitors are being completely overtaken.

$HITI (+0,87 %) is one of the few cannabis companies that can secure non-dilutive financing. This happened recently, but it was not the first time.

This is notable considering how reluctant lenders are to fund cannabis companies in Canada, where many companies have suffered bankruptcies when capital dried up, including major players backed by billionaires.

However, this funding comes with strict strings attached. Smart dilution may be necessary from time to time to differentiate from competitors and strengthen the company's long-term position, but is never done unnecessarily.

Founder & CEO Raj Grover, the largest shareholder, is the most affected by any dilution that takes place. He has already said that it will only happen at this low price if it increases the margins of $HITI (+0,87 %) and adds to the portfolio of stores/brands.

It is also worth noting that according to Raj $HITI will never be over-leveraged. His father was a small business owner and always taught him to prepare for the "what ifs".

$SNDL (+0,36 %) could pose the biggest threat to $HITI, but I'm not worried about their poor management team.

While the strategy of $SNDL (+0,36 %) acquiring distressed companies at depressed prices seems smart, they often struggle to make these companies profitable. In contrast, $HITI targets failing companies with promising locations to turn them around, and not just because they're cheap.

The attempts of $SNDL (+0,36 %) to diversify into different segments like alcohol has diluted their focus and effectiveness. They are no longer even a cannabis company, as the majority of their revenue comes from alcohol sales.

Despite their aggressive cash position, their mismanagement makes them less of a threat.

Despite the fact that $HITI (+0,87 %) being a relatively low margin retailer, gross and FCF margins (~8% high so far) still have room for further growth.

Cannabis prices in Canada are just beginning to stabilize and $HITI is waiting for the market to fully stabilize before aggressively launching white-label products. While many independent operators are closing and the market is consolidating, $HITI is not yet raising prices to avoid taking advantage of competitors. The long-term strategy is to leverage pricing incrementally.

Valuation

$HITI (+0,87 %) is the most superior cannabis company, but one of the cheapest.

Retail investors in Canada have lost more than $130 billion since the bubble burst in 2017 alone, so I understand why everyone is cautious in this sector.

But I've shown how $HITI stands out from the most well-known cannabis companies like $WEED (+1,99 %) , $TLRY (-0,84 %) and others. High Tide generates strong free cash flow and has a track record of consistently impressive execution.

Most importantly, it has a strongly aligned management team that cares about shareholders, which is rare in this sector.

The fact that this sector is at the height of pessimism makes it possible,$HITI (+0,87 %) i to buy at such a favorable valuation.

It's also worth noting that $HITI, unlike the other companies mentioned, entered the market late and was not part of the 2017-2018 bubble. That's why it's so underappreciated and most people don't even know about it.

Let's look at the numbers.

$HITI has generated $22 million CAD in free cash flow over the last 12 months, which means the company is currently valued at 16x LTM FCF. It's worth noting that this was the first full year of FCF profitability, so this number should improve significantly from here.

Since most cannabis companies are not FCF positive, we use EV/EBITDA as a proxy.

$HITI (+0,87 %) is trading at about 7 times adj. EBITDA. Importantly, adj. EBITDA is up 41% year-over-year in the last 12 months. It is astounding that it is trading at such a low multiple.

I expect the company to generate adj. EBITDA of CAD 90 million in 2027, which at a 15x multiple would provide almost 300% return on the current valuation. This estimate excludes potential international expansion, which I believe will happen soon in the US.

The discrepancy is huge when we look at other cannabis stocks listed on the Nasdaq. For example $TLRY (-0,84 %) trades at almost 30 times, $ACB (+1,47 %) at 12x (this company has restructured its business but is more focused on medical/premium cannabis), and $WEED (+1,99 %) is not even EBITDA positive.

High Tide is the best performing cannabis company and one of the few already generating both FCF and net income, but remains the cheapest.

Faster growth + better margins + a superior management team + a profitable business model + the lowest valuation = an absolute bargain price, at least from my perspective.

While most investors avoid this sector because of the well-known companies that destroy shareholder value, I am taking advantage of this opportunity by investing in what I believe is a hidden gem.

Signs that the bottom is behind us:

• The recent acquisition of Nova Cannabis by $SNDL (+0,36 %) at a low valuation multiple may have highlighted how undervalued $HITI is. Nova Cannabis was one of High Tide's few competitors, but has lost direction under the ownership of $SNDL. This acquisition occurred at an EV/TTM sales multiple of 0.55-0.6, while $HITI, a more established and superior company, was valued at 0.4x. Similarly, $HITI's EV/TTM gross profit multiple is 1.4x and differs significantly from Nova's 2.4x. This discrepancy shows that $HITI is undervalued and the market already recognizes this.

• After Trump's victory, which has put the entire cannabis sector (including $MSOS , $WEED (+1,99 %) , etc.) to a significant decline, the performance of $HITI remained strong. Despite the double-digit decline across the sector, $HITI has maintained a significantly higher value compared to pre-news prices. This resilience suggests that $HITI is too cheap to be ignored and the market is starting to recognize this.

Before concluding this post, I would like to point out the following:

$HITI (+0,87 %) $HITI has less than 11% institutional ownership, while over 75% of the market is held by institutions.

Peter Lynch talks about this a lot. If you want multibagger returns, find a hidden gem before the institutions do.

I think that's exactly the case here. I'm not going to sell it at 100% or 200% profit as I think it has the potential to become a billion dollar company soon.

Of course, this assumes that execution continues as it has been.

Probably the first and only time I've had a triple-digit return 🥳 My thanks go out to $RKLB (-1,01 %) as the top performer in the portfolio. I'll be surprised for 2025!

The more I learn about it, the more excited I get about the huge multibagger potential.

Few people really understand it, but many people talk about it.

We are talking about Rocket Lab $RKLB (-1,01 %) !

1 Background and history of Rocket Lab

The history of $RKLB (-1,01 %) began in 2006 when aerospace engineer Peter Beck from New Zealand founded the company.

As a teenager, Peter Beck enjoyed working on projects such as turbocharging an old Mini and launching water rockets. While training as a toolmaker, he began experimenting with rockets and propellants, even building things like a rocket-powered bicycle, scooter and jetpack. He later worked in product design and then moved to another company where he learned more about advanced materials such as composites and superconductors. He even bought a cruise missile engine from the USA.

In 2006, Peter Beck founded Rocket Lab in New Zealand. He was able to attract investors, including Mark Rocket, who helped finance the company and was co-director from 2007 to 2011. Beck's passion for building things from scratch played an important role in the company's growth.

His vision was to facilitate access to space by developing lightweight rockets specifically designed to launch small satellites - a growing need in the industry.

(Peter Beck, CEO)

In just three years $RKLB (-1,01 %) the first private company in the southern hemisphere to reach space.

This milestone was achieved in November 2009 with the launch of the Ātea-1 probe rocket. Probe rockets follow a trajectory pattern to collect data and measurements for future missions, making them essential for research and space exploration.

Rocket Lab's Ātea-1 was launched from a private island off the coast of New Zealand. Interestingly, the island belonged to one of Rocket Lab's major investors, New Zealand banker Michael Fay.

Following this success, Rocket Lab began to attract significant interest from both government and military sectors. The US government, including NASA, showed particular interest in the company's potential to launch nanosatellites on small rockets. As part of the collaboration, Rocket Lab secured several contracts to study the feasibility of using small rockets for space applications. Although the initial funding for these contracts was modest, they were instrumental in providing Rocket Lab with access to valuable NASA resources.

The relationship of $RKLB (-1,01 %) with U.S. defense agencies, particularly DARPA and the Office of Naval Research (ONR), was also a key factor in the company's growth.

DARPA funded early research projects such as the development of a high-density rocket propellant called Viscous Liquid Monopropellant (VLM), for which Peter Beck holds a US patent. These defense contracts not only helped Rocket Lab financially in the early stages, but also enhanced its reputation as a company with innovative technologies. One of the notable defense projects was "Instant Eyes," a tactical unmanned aerial vehicle (UAV) designed for real-time intelligence gathering that showcased Rocket Lab's versatility and innovation.

Lockheed Martin $LMT (-0,07 %) also became an important partner during Rocket Lab's early growth. The company participated in funding rounds and supported Rocket Lab's development programs, adding another layer of credibility and financial support. Their investment underscored the strategic importance of Rocket Lab's technology, and Lockheed's involvement enabled Rocket Lab to build a stronger network within the space industry.

This combination of commercial and defense contracts played a critical role in the company's survival and early growth, allowing it to secure both funding and credibility in the aerospace and military industries. By entering into these early partnerships, Rocket Lab laid the foundation for its later expansion into the global space industry.

After $RKLB (-1,01 %) established a strong relationship with the U.S. government and NASA and secured numerous contracts and patents, the company decided to relocate its operations to the United States in 2013. This strategic move was to allow it to tap into the larger market, utilize advanced facilities and take advantage of the growing opportunities in the US space industry.

Despite this move, New Zealand remains an integral part of Rocket Lab's operations. The country continues to be the location for the rocket launch base on the Māhia Peninsula, which offers a unique and strategic location for launching rockets into various orbits. New Zealand's favorable geographic location and dedicated team play a critical role in Rocket Lab's global launch capabilities.

By maintaining close ties with New Zealand, Rocket Lab benefits from the country's supportive regulatory environment and established infrastructure, which was essential to the company's early success. This dual presence allows Rocket Lab to effectively serve a global customer base while leveraging the strengths of both locations.

2.Electron

In the years following the move to the USA, Rocket Lab made significant progress in the development of its flagship rocket Electron. The company's focus shifted to refining its technology and scaling operations, which required multiple rounds of funding to support these efforts. Each round of investment played a critical role in advancing the design, manufacturing and testing of the Electron rocket.

Rocket Lab's approach to the Electron was innovative and ambitious. The rocket was developed to meet the growing need for reliable and cost-effective launches for small satellites. It features a unique carbon composite structure that reduces weight and cost while maintaining structural integrity. The Electron's Rutherford engines, which use a combination of electric pumps and a novel liquid oxygen and kerosene propellant system, represent a significant technological advance and set the rocket apart from traditional designs.

Electron's first flight took place in May 2017, when it reached space but failed to reach orbit. Electron's second flight took place in January 2018, when it successfully launched two satellites into orbit. The success of this launch validated Rocket Lab's approach and solidified Electron's role as a cost-effective solution for launching small payloads into space.

The launch of the Electron revolutionized the small satellite launch market by providing an affordable launch option for small satellites that were previously limited by the availability and cost of rideshare on larger rockets. This success marked a significant advance since the early days of Rocket Lab and set the company on a path of rapid growth and expanded market presence.

Following the successful debut of the Electron rocket in 2018, Rocket Lab continued to chart its course, making significant progress and improvements to the rocket's design and operational capabilities:

- Improved performance and reliability:

In the years following the Electron's initial success, Rocket Lab focused on refining the rocket's performance and reliability. The company made several upgrades to the Electron's design, including improvements to the Rutherford engines and structural modifications to increase performance. These improvements were aimed at increasing the rocket's payload capacity and expanding its mission capabilities.

- Increased launch frequency:

Rocket Lab made progress in increasing the frequency of Electron launches. The company established a more efficient launch process and improved turnaround times between missions. By optimizing its operations, Rocket Lab was able to offer more frequent launch opportunities for its growing customer list. This efficiency helped cement Electron's reputation as a reliable and flexible launch vehicle for small satellites.

- Reusability efforts:

In keeping with industry trends toward reusability, Rocket Lab also explored options to make the Electron rocket more sustainable. The company tested and developed technologies to recover and refurbish rocket components to reduce costs and environmental impact. While full reusability has not yet been achieved, these efforts marked an important step toward more cost-effective and environmentally friendly space launches.

- Mission diversity and enhanced capabilities:

Rocket Lab continued to diversify its mission profile with the Electron rocket. The rocket successfully completed a variety of missions, including satellite launches for Earth observation, technology demonstrations and scientific research. Notable missions included the CAPSTONE mission for NASA to the moon, a major milestone that demonstrated Rocket Lab's ability to handle complex interplanetary missions.

In addition, Rocket Lab conducted the HASTE (Hypersonic Accelerator Suborbital Test Electron), a modified version of the Electron for hypersonic and suborbital missions, further expanding the rocket's versatility and demonstrating its utility in supporting defense and exploration applications. This makes the Electron not only a launch vehicle for small satellites, but also an important resource for hypersonic test programs and opens up a new growth path.

- Global launch locations:

To meet growing demand and expand its global reach, Rocket Lab developed additional launch sites. The company continued to utilize its original base on the Māhia Peninsula in New Zealand while moving forward with plans for a new launch facility in the US. This expansion was intended to provide greater flexibility and support a higher volume of launches, strengthening Rocket Lab's position as a major player in the small satellite launch market.

- Technological innovations:

During this time, Rocket Lab continued to innovate and integrate new technologies and systems into the Electron rocket. These innovations included advances in avionics, propulsion systems and payload integration, all of which contributed to improved performance and mission successes.

In 2024, Rocket Lab's Electron rocket remains a cornerstone of the company's launch services and continues to provide reliable and cost-effective solutions for launching small satellites. Ongoing improvements and strategic developments, such as the HASTE program and high-profile missions like CAPSTONE, have positioned the Electron rocket as the leading choice for customers seeking efficient access to space.

Brief overview of some of the successes of $RKLB (-1,01 %) 's Electron this year (H1 2024):

- 17 new launch contracts signed YTD, with a total contract value of $141 million;

- Electron is now the third most launched rocket in the world, behind only Falcon 9 and China's Long March;

- Achieved a 100% increase in launch rate in H1 2024 compared to H1 2023;

- Electron accounts for 64% of all non-SpaceX launches in the U.S. so far in 2024

- Electron is the fastest commercially developed rocket to reach 50 launches and is expected to be the fastest to reach 100 launches;

- On its 50th mission, Rocket Lab deployed a customer satellite to within eight meters of its target, well above the industry average of 1,500 meters. This precision positions Electron as the preferred choice for complex missions such as rendezvous and proximity operations, constellation replenishment and customized orbits.

Rocket Lab is the undisputed leader in small launches, with differentiated capabilities that demonstrate why many satellite operators are willing to pay a premium for Electron.

Basics of Electron's business model explained 👇🏻

$RKLB (-1,01 %) 's Electron offers something unique in the launch market: a launch service that is tailored to the specific needs of each customer. This means that customers can choose and change their launch date, select their launch location and specify exactly where they want to be placed in orbit. They can also launch with an incredibly short lead time - sometimes as little as eight weeks from signing the contract to launch. This flexibility is something that rideshare launches on larger rockets simply can't offer.

However, this flexibility also makes it difficult to predict exactly how many launches will take place in a given quarter, which can lead to short-term volatility in revenue recognition.

But here's the key point: Rocket Lab receives the bulk of the money (up to 90% of the contract value) well in advance of the launch date, thanks to their billing model. Even if the launch date is delayed, the impact on cash flow is minimal. Revenue is only recognized on the launch date according to accounting practices, but the money has already been received, showing the strong underlying cash flow of their business.

🚀 16 launches in 2024, an increase of 60% year-on-year

🚀 4 launches in the last 4 weeks (2 of which in less than 24 hours of each other)

🚀 100% mission success rate for the year 2024.

3rd photon

The success of $RKLB (-1,01 %) with the Electron rocket paved the way for expansion and diversification. From 2020, the company began to expand its focus beyond pure launch services. This strategic shift aimed to create a more comprehensive portfolio of space-related products and services and thus strengthen its position in the space industry.

A milestone in this diversification strategy was the launch of Rocket Lab's spacecraft development division. In 2020, Rocket Lab launched its Photon satellite platform to the market, marking the company's entry into the spacecraft sector. The Photon platform offers a complete satellite solution that includes design, manufacturing and operations. By providing end-to-end satellite services, Rocket Lab expanded its role from a pure launch provider to a full-service space company.

The Photon satellite platform was developed to meet the needs of a variety of missions, from Earth observation and scientific research to communications and technology demonstrations. This move allowed Rocket Lab to address a broader range of customers and projects and further solidify its presence in the space industry.

4. acquisitions

The expansion of $RKLB (-1,01 %) 's expansion into the field of space systems was not only based on internal developments, but was actually driven by a series of strategic acquisitions.

In 2020, Rocket Lab acquired Sinclair Interplanetary, a leading manufacturer of satellite hardware, which strengthened the company's capabilities in the manufacture of key satellite components such as reaction wheels and star sensors.

This acquisition was accompanied by other acquisitions aimed at expanding Rocket Lab's technical offerings.

In December 2021, Rocket Lab acquired Advanced Solutions and Planetary Systems, expanding the company's ability to offer mission simulations, flight software and separation systems for spacecraft.

In early 2022, the acquisition of SolAero Holdings, a leader in space solar arrays, was added, adding the important capability to manufacture advanced solar cells for space applications.

In addition, Rocket Lab acquired SailGP Technologies, bringing on board the facilities and team from Warkworth, New Zealand.

These acquisitions enabled Rocket Lab to offer a full spectrum of satellite and spacecraft technologies, making it one of the few companies that can provide end-to-end mission solutions from spacecraft to launch.

By combining its own innovations, such as the Photon platform, with strategic acquisitions, Rocket Lab has positioned itself as a key player in both launches and space systems, significantly expanding its service offering and increasing its competitiveness.

5.Space Systems segment

The Space Systems segment essentially focuses on developing and providing the technology that makes space missions possible.

This includes, among other things

- Satellites: They design and build small satellites that can be used for various purposes, such as collecting data from Earth, communications or scientific research.

- Components: They manufacture important parts that are used in satellites and spacecraft, such as solar cells for energy supply, sensors for data collection and radios for communication.

- Software and ground systems: They develop software and systems that help manage satellites from Earth and ensure they function properly in space.

In short, this segment helps put working satellites into space and support their operations.

This is exactly why I believe Rocket Lab has a huge advantage over its competitors.

competitors: The company develops everything in-house and doesn't rely on any suppliers.

While most believe that $RKLB is solely focused on rocket launches, the "Space Systems" segment accounted for over 70% of sales in the last quarter!

6 The future of Rocket Lab

What's next for $RKLB (-1,01 %) ? - The Neutron-rocket!

As Rocket Lab continues to push the boundaries of space technology, the company's next big step is the development of the Neutron rocket. This new rocket represents a significant evolution of Rocket Lab's capabilities and a strategic expansion of its launch offerings.

Introduced as a larger and more powerful vehicle than the Electron, the Neutron rocket is designed to meet the space industry's growing demands for medium launch capabilities. With a focus on versatility and efficiency, the Neutron is expected to handle a wider range of payloads and mission profiles, including larger satellite constellations and deep space missions.

The Neutron rocket offers several key features that set it apart from its predecessors. It is partially reusable, with plans to recover and refurbish its first stage to reduce costs and increase launch frequency. This reusability is in line with broader industry trends and aims to make access to space more sustainable and affordable.

In addition, the Neutron rocket incorporates advanced technologies. Its larger payload capacity enables the deployment of heavier and more complex payloads, expanding Rocket Lab's ability to serve a variety of customers and mission types.

Everything is moving in the right direction to ensure that the Neutron rocket be launched by mid-2025 can be launched.

Peter Beck (CEO) is often asked why $RKLB is investing in Neutron, a medium launch vehicle, and how the company plans to compete with it:

Currently, there is virtually a monopoly in the medium launch capability market, and demand is growing rapidly, especially for satellite constellation deployment.

With over 10,000 satellites to be launched by the end of 2030, Neutron is perfectly positioned to revolutionize this market.

Rocket Lab's proven success with the Electron shows that the company knows how to build reliable, market-leading vehicles. By working closely with customers, they have designed Neutron to meet specific needs and are well on their way to launching it quickly. Their track record in investment and accurate market assessment suggests that Neutron will be a great success, just like Electron.

With a starting price of approximately USD 60 million, Neutron will be a game changer for Rocket Labs revenue.

In addition to playing a critical role in unlocking the large mid-stage launch market, Neutron is also the missing piece of the puzzle to complete $RKLB's space ecosystem.

And with that, it's time to clear up the most common misconception about the company - Rocket Lab isn't just a "startup", it's an end-to-end space company 👇🏻

Sure, they're industry leaders in the rocket launch business - Electron for small launches and the upcoming Neutron to enter the medium launch market - but that's only part of what they do.

Peter Beck breaks it down into three main areas:

- The ride: the first step is getting to space, and Rocket Lab has mastered that with their Electron rocket, and soon with Neutron, which will tackle the medium launch market.

- The tools: Once in space, the real work begins. Rocket Lab doesn't just send things into space - they also provide the spacecraft, components, software and ground systems needed to make missions in orbit successful. They are already delivering this for commercial and government customers.

- The data and services: This is where the long-term value lies. By controlling both the launch and spacecraft domains, Rocket Lab can develop and deliver space capabilities like constellations without the delays and costs others face. This positions them for long-term, recurring revenue and creates additional value for shareholders.

In short, Rocket Lab's vision goes far beyond just launching rockets - they are building the infrastructure for an entire space ecosystem. This broader vision is critical to understanding their successes now and in the future.

7.the long-term potential of $RKLB (-1,01 %)

I realize that the previous explanation does not provide enough detail for some to understand the true potential of $RKLB.

Essentially, there are many applications and business models that are enabled by the deployment and operation of spacecraft or satellite constellations. Once $RKLB finalizes its end-to-end space ecosystem, it will be able to pursue any opportunity it chooses.

At first I didn't fully understand this, but these include services such as satellites that provide imagery and data collection for agriculture, environmental monitoring, disaster management and defense; satellite communications with advances in real-time connectivity for IoT devices, autonomous vehicles and global networks; the development of in-orbit manufacturing for specialized materials that can only be produced in a zero-gravity environment (such as high-precision optics, pharmaceuticals or even semiconductors); outsourcing data storage or computing power to satellites in space (which has multiple benefits); space debris management services, a growing problem as the sector evolves; as well as many other potential applications.

I didn't realize how huge the potential of the space economy is until I learned of some of the real-world applications it can have. I guess that's why it's becoming a trillion dollar industry.

A good insight report on this is "Space: The $1.8 Trillion Opportunity for Global Economic Growth" by WEF and McKinsey & Co.

8.when will Rocket Lab become profitable?

Adam Spice, (Chief Financial Officer CFO of $RKLB), on when the company will generate sustainable positive cash flow:

"I've been pointing people towards two quarters after the first Neutron launch as the point where we turn that corner on a more permanent basis, given the growth of the rest of the business and how the P&L will look once we've completed that first R&D test launch and established most of the infrastructure to scale Neutron."

Translated:

"I've always told people that two quarters after the first Neutron launch will be the point where we turn that corner on a more permanent basis, given the growth of the rest of the business and how the P&L will look once we've completed that first R&D test launch and established most of the infrastructure to scale Neutron."

That means around the first quarter of 2026, better than expected.

It is important to note that Rocket Lab would already be profitable if the company did not invest money in the development of Neutron - based solely on Electron and the Space Systems segment!

9. comparison with the competition

Another very important advantage that $RKLB has is the ability to develop impressive rockets that are much more cost-effective than those of its competitors.

Peter Beck explains 👇🏻

Rocket Lab's ability to develop rockets like Neutron at a significantly lower price than competitors is due to their unique approach and deep experience. They excel in cost efficiency, thanks to their development process that aims to identify and fix problems quickly at the component level, rather than waiting for these issues to emerge in more complex systems. This means they can solve problems early, avoiding costly rework later on.

Their experience plays a critical role, as demonstrated by Rocket Lab's successful Electron rocket program. Rocket Lab has perfected its methods over time, allowing them to build fully operational engines like the Archimedes without relying heavily on small-scale preliminary testing. This approach speeds up development and lowers costs as the engines are tested in their final form rather than through prototypes.

Essentially, Rocket Lab's strategy of rapid iteration, combined with its expertise and testing procedures, allows it to develop and launch rockets faster and more cost-effectively than many of its competitors, be they incumbents or new entrants.

9.Valuation

This might be a bit controversial, but let me explain my thesis. ⬇️

The space industry today could be likened to the early days of the internet and is at a crucial inflection point in its development.

Overall, the global space economy is expected to reach a value of 1.8 trillion dollars by 2035, driven by growing demand from both commercial companies and government agencies.

$RKLB is at the forefront, providing essential launch services and developing technologies that could significantly advance space travel and commercialization.

The last private valuation (dated 03/12/2024) of SpaceX was $350 billion, approximately 60 times the current market capitalization of $RKLB.

While SpaceX is currently an established company and the market leader in the sector, the gap will narrow as Neutron's development progresses.

$RKLB has several competitive advantages and proven expertise that position the company as a strong contender for industry leadership. As Peter Beck, said, "Sometimes you can start at the back, but that doesn't mean you finish last."

I usually avoid investing in companies with negative cash flow because their valuation is difficult. This is especially true for $RKLB, given the sales volatility in the short term. Nevertheless, I am optimistic about Rocket Lab's impressive long-term potential. If the company continues on the right path, it could be worth tens of billions of dollars in a few years.

All in all, I understand that $RKLB may seem too expensive for number crunchers based on current numbers and profitability. Nonetheless, I believe the narrative makes the company a compelling opportunity in a sector that has great potential in the coming decades.

Looking back on $RKLB's impressive progress, it is clear that Peter Beck's leadership has been critical to the company's success.

His vision and dedication were key to taking Rocket Lab from a small startup to a major player in the space industry.

That is why he is widely recognized as both a brilliant engineer and a visionary leader in the industry.

Peter Beck's journey from young rocket enthusiast to founder of Rocket Lab shows his dedication and creativity. His hands-on approach and drive to make space more accessible has been at the heart of the company's growth. He has not only guided Rocket Lab through challenges, but also prepared it for future success.

This team has already more than proven its quality when it comes to solving problems and driving new technologies forward. I am confident that Rocket Lab will continue to grow and make a big impact in the space.

$RKLB (-1,01 %)

#SpaceX