OrganiGram Holdings Inc OGI is scheduled to report second-quarter results before the market opens on April 14.
Although the quarterly results are unlikely to be a near-term catalyst for the stock, the company is among the better-managed licensed producers of cannabis and is profitable, according to Cantor Fitzgerald.
The OrganiGram Analyst
Pablo Zuanic maintained an Overweight on OrganiGram Holdings and reduced the price target from CA$9 ($6.32) to CA$5.80 ($4.07).
The OrganiGram Thesis
The overall recreational cannabis market is likely to have generated more than 8% sequential sales growth in February, implying total market growth of 21% for the February quarter, Zuanic said in a Wednesday note. (See his track record here.)
Yet OrganiGram is unlikely to post this kind of sequential growth in the second quarter in light of the company’s sales growth in recreational cannabis in the prior quarter, the analyst said.
In the November quarter, OrganiGram’s sales of recreational cannabis declined by 4% and the company’s overall sales growth was driven by the wholesale business, which generated $9.2 million in sales, he said.
Zuanic said he expects OrganiGram’s margins to be under pressure due to a higher marketing spend and start-up costs related to its new product lines.
The company is approaching positive operating cash flow and its stock valuation is attractive, according to Cantor Fitzgerald.
OGI Price Action
Shares of OrganiGram were down 10% at $1.80 at the time of publication Wednesday.
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