Organigram Analyst Cuts Price Target, Lowers Sales Estimates Ahead Of Q1 Report

Organigram Holdings Inc. OGI shares lost 63.58% over the past 12 months. Cantor Fitzgerald lowered its price target Monday for the cannabis company ahead of its first-quarter report on Jan. 27.

The Organigram Analyst

Pablo Zuanic maintained an Overweight rating on Organigram and cut the price target from CA$13.30 ($10.25) to CA$9.50 ($7.32).

The Organigram Thesis

In order to mirror market share that's more in line with the August quarter than prior quarters, Cantor trimmed its sales estimates for Organigram, Zuanic said in a Monday note. (See his track record here.) 

The January and May quarters were not a true representation of the underlying movements considering the effects of price discounts and returns, the analyst said. 

The consensus estimates are high, Zuanic said, adding that Cantor is 5% below the Street on sales — and 40% below the conensus adjusted gross margin estimate. 

"That said, OGI remains one of the most cost-efficient operators in Canada, with a focused approach, and we continue to think the valuation is attractive (3x 1yF EV/Sales compared with most direct peers at 7-8x)." 

It will take a while for Organigram to regain credibility after the company's August quarter, the analyst said. 

Organigram experienced a significant drop to $16 million in net sales in the August quarter versus net sales of $25-27 million in the second and third quarters, he said, adding that “we expect minor improvements to $18Mn in the Nov Qtr.”

Organigram Price Action

Organigram shares were down 3.52% at $2.19 at the time of publication. 

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