Organigram Holdings Inc. OGI OGI reported first-quarter net revenue of CA$25.2 million ($19.3 million) Tuesday, up 102% year-over-year from CA$12.4 million.
The Organigram Analysts
Cantor Fitzgerald’s Pablo Zuanic maintained an Overweight on Organigram and lowered the price target from CA$9.50 to CA$9.
BofA Securities' Christopher Carey maintained an Underperform rating with a CA$2.50 price objective.
Cantor’s Zuanic Says Overnight Gain is Overdone
Despite Organigram reporting improved sales and EBITDA, with most metrics better than in the August quarter, Zuanic said he's worried about the company’s recreational and medical sales, which haven’t improved from November, “with the bulk of the growth driven by lower margin bulk sales.”
The analyst reduced the 12-month price target on the basis of forward sales and mix.
Organigram is excited about the industry macro outlook and the launch of its 2.0 products, he said.
The stock’s 30% after-hours jump occurred due to improved sales and a fast recovery from the November quarter, Zuanic said.
“That said, even though we rate OGI OW(on valuation, trading at 7x current sales vs. 11-12x for peers like ACB (OW), APHA (OW), HEXO (UW), TLRY (N)), the implied overnight gain seems overdone to us given the lack of core seq growth and lack of guidance (other LPs like APHA provide it).”
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BofA’s Carey Says Organigram Should Add Leverage
“Our take on the quarter is that the headline is a lot better than the underlying,” BofA’s Carey in a Wednesday note.
Although the company’s net sales of CA$25.2 million surpassed BofA’s expectations of CA$23 million, the company’s growth was driven by B2B wholesale revenue, the analyst said, adding that adult-use cannabis sales have declined quarter-over-quarter for the third quarter in a row.
Organigram is the only cannabis company with a track record of positive EBITDA, Carey said.
BofA is not worried about the company’s solvency and view it as being in a better position than others in the sector. At the same time, Carey said he expects Organigram to add leverage and drive equity dilution to fill financing gaps.
The Underperform rating on Organigrams is “not a function of execution,” but rather a function of BofA being selective in looking for companies with cash-rich balance sheets, the analyst said.
Organigram Price Action
Organigram shares were trading 42.59% higher at $3.08 at the time of publication Wednesday.
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