Back to top

Bear of the Day: OrganiGram Holdings (OGI)

Read MoreHide Full Article

OrganiGram Holdings (OGI - Free Report) is a Canadian-based medical cannabis company that sells to both individuals and physicians. The company also operates healing centers that focus on treating post-traumatic stress disorder and chronic pain, as well as providing trauma therapy.

Q2 Earnings Recap

OGI faced a ton of challenges in its second quarter, primarily weak industry dynamics, Covid-19, and resulting staffing limitations at its grow facility in New Brunswick. Several employees tested positive, resulting in many missed sales opportunities.

All three factors weighed on OrganiGram’s performance.

Revenue of CA$19.2 million fell 29% year-over-year, while net revenue after excise taxes dropped 37% to CA$14.6 million.

Net loss for the period ballooned to CA$66.4 million compared to a much smaller net loss of CA$6.8 million in the prior-year period. Gross margin fell into negative territory because of a higher cost of sales, causing its adjusted EBITDA to fall.

Shares initially dropped 12% after the earnings report was released last week.

Bottom Line

OGI is now a Zacks Rank #5 (Strong Sell).

Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen six cents to a loss of $0.24 per share; earnings are expected to see a triple-digit decline for fiscal 2020.

Over the past one year, shares have gained about 48%, which is slightly ahead of the S&P 500’s rally of 44%.

Going forward, CEO Greg Engel said OGI is “currently tracking to generate higher revenue in Q3 2021 as our new product portfolio continues to gain traction and we become better staffed to fulfill demand."

Additionally, the company recently acquired The Edibles & Infusions Corporation, which should help lift its cannabis edibles revenue.

While management believes last quarter’s drop in business is temporary—and mostly related to the pandemic—investors should still be wary of any lingering uncertainties and industry impacts from Covid-19.

Investors who are interested in adding a company with cannabis exposure to their portfolio could consider pharma giant Johnson & Johnson (JNJ - Free Report) . JNJ stands to profit from the development of THC, CBD, and other marijuana-derived therapeutics; it’s a #3 (Hold) on the Zacks Rank, and earnings are expected to grow about 18% in fiscal 2021.

+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities

In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.

Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.

Click here to download this report FREE >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Johnson & Johnson (JNJ) - free report >>

Organigram Holdings Inc. (OGI) - free report >>

Published in