Organigram: Mixed Commentary From Analysts Following Q1 2021 Results

Organigram Holdings (TSX: OGI) (NASDAQ: OGI) yesterday morning reported its first-quarter 2021 financial results for the period ended November 30, 2021. The company reported net revenue of $19.3 million, down 23% quarter over quarter, along with gross margins of -20%.

Organigram currently has 15 analysts covering the company with a weighted 12-month price target of C$2.51. This is down from the average before the results, which was C$2.66. Two analysts have strong buys while another three have buy ratings, and the majority, ten analysts, have hold ratings.

Here are the lastest analyst changes:

  • Eight Capital cuts price target to C$2 from C$3.50
  • Canaccord downgrades to Hold from Buy, cuts price target to C$2 from C$2.50
  • Raymond James upgrades to Outperform from Market Perform
  • Stifel-GMP raises to C$1.90 from C$1.75, reiterates Hold rating.
  • Cantor Fitzgerald raises to C$3.50 from C$3, reiterates Overweight.

Firstly, let’s look at Raymond James, whos analyst Rahul Sarugaser held their 12-month price target at C$3 but upgraded the stock to outperform from market perform. Sarugaser headlines “Rev. Bottom Is In: Buy the Dip | Unmet Demand: +Mkt Share, +Capacity | U.S. Play Emerging.” He then writes, “we believe OGI’s turnaround is imminent, the bottom is in, and we recommend clients begin building positions.”

Sarugaser writes that he believes that the bottom is in for Organigram’s market share. Over the last two years, their market share slowly drifted from 8.5% in 2019 to 4.2% current day, and Sarugaser expected them to continue to lose market share.

Organigram beat Raymond James’ adult-use expectations with revenue coming in at $16.8 million. He believes this beat came from an uptick in demand for their products. He writes, “an early success yielded from its long-running SKU revitalization exercise, and a testament to the company’s growing brand equity in Canada.”

Sarugaser ends the note by writing, “we see today’s stock weakness as an excellent opportunity to build positions.”

Onto Stifel-GMP, analyst Andrew Partheniou reiterated their hold rating but raised their 12-month price target from C$1.75 to C$1.90. He says the results were neutral. The results were below expectations in both gross margin and EBITDA estimates. Partheniou writes, “we believe the company’s product portfolio revamp strategy to win back market share is showing signs of success.”

He says that Organigram mentioned they are increasing staffing and currently rightsizing their production levels, which could have increased their sales by 25%. He writes, “Overall, we retain our cautiously optimistic stance amid this backdrop while recognising the execution risk involved in achieving management’s goals.”

Matt Bottomley, Canaccord’s analyst, hit Organigram with a double whammy, downgrading Organigram to a Hold while cutting their price target to C$2. His headlines are “Revenues continue to stagnate while near-term outlook remains challenged.”

Bottomley says that the results came below their expectations on both revenue and EBITDA as the company continues to work through rightsizing and COVID related issues.

Bottomley touches on the near term outlook Organigram provided. He comments that management guided that there will be some missed revenue opportunities and more charges to COGS that will bleed into the second/third quarter.

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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