Organigram: Analysts Upgrade Targets Following BAT Investment

On March 9th, Organigram Holdings (TSX: OGI) (NASDAQ: OGI) announced that they received a C$221 million strategic investment from British American Tobacco, which is the equalivent to 53.3 million shares or a 19.9% stake in the cannabis company.

Organigram currently has 14 analysts covering the company with a weighted 12-month price target of C$3.58. This is down from last month, which was C$2.45. Two analysts have strong buys while another two have buy ratings, and the majority, nine analysts, have hold ratings, and one has a sell rating on the name

Five analysts have changed their 12-month price targets after the news:

  • ATB Capital markets raises target price to C$4.20 from C$1.90
  • Eight Capital raises target price to C$3.85 from C$2.40
  • CIBC raises target price to C$5.00 from C$4.25
  • Cantor Fitzgerald raises target price to C$6.00 from C$3.50
  • Raymond James raises target price to C$6.00 from C$3.00
  • Haywood Capital raises target price to C$4.75 from C$2.00

Below are excerpts from a few analyst’s notes.

Raymond James says that this investment makes Organigram one of the “best-capitalized cannabis companies.” Raymond James now expects Organigram to hold a 12.5% market share of the Canadian market share. This is up from 6.5% by 2025. Below you can see their new revenue estimates.

Cantor Fitzgerald says that with only C$30 million of the whole C$221 million investment going towards joint product development, OGI will have roughly C$266 million of free money on their balance sheet. They expect Organigram to start looking at M&A with all that money.

Haywood says that this investment “provides a significant boost on the optionality for OGI going forward. We believe this is a positive transaction for OGI and see an increased probability for the company to enter other geographic markets.” The firm also changed its estimate methodology, now basing it on 10x EV/Revenue, compared to the prior estimate being based on a multiple for EV/EBITDA.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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