Why Cannabis Investors are Bullish on Organigram Holdings Inc. (OGI)

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October 4, 2019 3:13pm NYSE:MJ

NYSE:MJ | News, Ratings, and Charts

Today Organigram (OGI) announced an audio interview with its CEO discussing the company’s growth and strategic expansion.

“One of the challenges for some companies is over-committing or over-promising on delivery, and that may have led to some practices that put them offside with regulators or from an operations perspective, or with their client base, their customers,” says Organigram CEO Greg Engel.

The CEO added that operational oversight via an independent board of directors and solid corporate governance practices set Organigram apart from its competitors.

“We are only one of three companies that currently have distribution agreements in all 10 provinces in Canada,” says Engel, emphasizing the company’s “measured approach.”

What sets Organigram apart from its competitors

Interestingly, Organigram is the only cannabis company that former Canopy Growth co-CEO Bruce Linton suggested investors should buy (aside from his own affiliated companies).

Part of OGI’s characteristic offering relates to its vertical cultivation technique. “Where the majority of companies went with large green house expansions, our facility is three levels. We actually do vertical cultivation,” said Engel.

The company’s 3-tiered proprietary vertical growing system enables it to maximize efficiency out of its 14-acre facility in Moncton, New Brunswick. The New Brunswick location also makes OGI unique.

OrganiGram is the only major Canadian producer based on the Atlantic coast, giving the company a home field advantage in a region known to be less populated, but with a higher percentage of cannabis consumers when compared to the national average.

OGI also cranks out some of the best yields in the industry. The company touts an annual output of 113,000-kilos, which breaks down to 230 grams per square foot.

Industry averages hover between 75 grams per square foot and 125 grams per square foot.

Wall Street Analysts have taken note

Beacon Securities analyst Russell Stanley says OrganiGram grow operations “…demonstrate continued execution against the company’s expansion plan, setting the stage for significant revenue/EBITDA growth in fiscal 2020.”

Stanley notes that OGI reported C$3 million cash its balance sheet last quarter. The analyst’s C$15 price target implies a one-year upside of 220% for OGI shares.

CIBC analyst John Zamparo says, “The company offers one of the few opportunities to gain exposure to the cannabis space at a reasonable price. We believe Organigram has a demonstrated track record of profitability, a rarity in the cannabis sector.”

Zamparo initiated coverage of OGI at C$9, suggesting a 92% upside.

Raymond James analyst Rahul Sarugaser anticipates OGI’s net revenues will increase from $97 million in fiscal 2019 to approximately $552 million in fiscal 2024 (when Canadian cannabis sales are expected to reach $6 billion). The analyst’s EBITDA projection for 2019 is $36 million, and by 2020, he expects it to reach $87 million.

OrganiGram Holdings Inc. (OGI) was trading at $3.51 per share on Friday afternoon, down $0.05 (-1.40%). Year-to-date, OGI has declined %, versus a 10.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Eric Bowler

eric-bowlerEric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.

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