On April 6th, Organigram Holdings (TSX: OGI) (NASDAQ: OGI) announced that they acquired cannabis 2.0 operator The Edibles & Infusions Corporation for $22 million plus an additional $13 million in potential earn-outs. Organigram says that the edibles market will grow to 15% of the Canadian cannabis market
Organigram currently has 14 analysts covering the company with a weighted 12-month price target of C$4.14. This is up from the average from last month of C$2.59. Two analysts have strong buy ratings and buy ratings. Nine analysts have hold ratings and one analyst has a sell rating. The street high comes from Stifel-GMP with a C$6 12-month price target and the lowest is C$2.
Raymond James came out and reiterated their outperform rating and C$6 price target following the news. Rahul Sarugaser, Raymond James’ analyst, says that Organigram is consolidating its position as a premier edibles company. Sarugaser writes, “We see today’s acquisition of EIC as OGI’s move to consolidate its already-strong position in the Canadian edibles market, adding top-quality soft chew manufacturing expertise to its industry-leading automated chocolate manufacturing capabilities.”
Raymond James reiterates Orgranigram’s claim that edibles will claim a >10% market share in Canada, where soft chews and chocolates claim most of that share. They believe that Edibles & Infusions will be able to fill the product gap in the soft chews market for Organigram. Additionally, they believe that the acquisition brings additional innovation capabilities as it adds in-house R&D in Moncton and in its Centre of Excellence initiatives which are backed by BAT.
Sarugaser says “we believe OGI is skating to where the puck is going, not where it is today,” as they believe that the Canadian 2.0/edible market has not been fully developed yet, likely for a multitude of reasons such as slower than expected rollout of retail locations and COVID-19. Raymond James believes as we get back to some sort of normalcy, we will see the entirety of the Canadian cannabis market accelerate, with Organigram being well-positioned if this were the case.
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.
