OrganiGram Holdings: The Other Big Cannabis Company in Canada
With More Substance Than Hype, OrganiGram Well-Positioned for What’s Next – LPC
When mentioning the major cannabis companies in Canada, people often forget the other big cannabis company: OrganiGram Holdings Inc. But according to a Motley Fool report earlier this year, that might not be a bad thing. At the time, OrganiGram traded at one-tenth the EBITDA of the industry average (22x vs. 226x). In other words, the “other big cannabis company” wasn’t caught up in investor hype.
Still, it is one of the top cannabis companies in terms of sales of recreational cannabis. Despite the pessimism in the market right now, OrganiGram Holdings is on the list of some analysts of having good upside potential. It made news last spring when its stock rose 62 per cent within months. Like most cannabis companies, its stock has eroded since then, hitting a year low of $2.72 on November 18. It’s bounced back and closed at $3.61 on November 28.
Over the last year or so, its market share has fluctuated between 8 and 14 per cent. Mackie Research analyst Greg McLeish said he believes market share to be at about 10 per cent right now. That makes it a big cannabis company by any measure. (Please see link below.)
CEO Greg Engel said the biggest challenge has been the slow opening of retail stores. The company cited disappointing cannabis sales, particularly in Ontario, as a major reason for lower revenues.
“In 2019, we increased staffing and capacity to meet forecasted demand and maintain inventory in the market,” Engel said. “Industry structural issues have challenged supply and demand dynamics in the short-term but we believe the growth opportunity in the Canadian cannabis market remains intact.”
MacLeish agreed. He added OrganiGram as “the other big cannabis company” is well-positioned to take advantage of retail markets as they open. “Canada’s cannabis market will continue to grow with (Cannabis 2.0) as well as a large expansion in Ontario and Quebec retail stores.”
The “Other Big Cannabis Company” Looks to Cannabis 2.0 for Increased Sales – LPC
OrganiGram hopes that the coming Cannabis 2.0 – specifically vaping – will help boost sales as well. Like many licensed producers, OrganiGram has contracted its vape cartridges to PAX Labs.
“OrganiGram is on track to launch vape pens in mid-December followed by cannabis-infused chocolate products in calendar Q1 2020. The company also expects its flavourless nano-emulsion powdered beverage product in calendar Q2 2020 based on expected licensing for the production area and equipment delivery and commissioning schedules,” McLeish wrote.
He predicted that OrganiGram would generate $140.2 million in sales in 2020, landing it squarely in big cannabis company territory. He revised his target price to $7.00 in that time.
This editorial content from the LPC News Team provides analysis, insight, and perspective on current news articles. To read the source article this commentary is based upon, please click on the link below.
