OrganiGram Received a Rare ‘Buy’ amid Downgrades


Oct. 14 2019, Updated 11:30 a.m. ET

Last week was tough for the cannabis sector. The ETFMG Alternative Harvest ETF (MJ) and the Horizons Marijuana Life Sciences Index ETF (HMMJ) fell 10.7% and 14.2%, respectively. Meanwhile, the S&P 500 Index rose 0.6% during the same period. Last week, Hexo (HEXO) reported its preliminary fourth-quarter revenues, which were lower than analysts’ expectations. Also, the company withdrew its previously announced guidance for fiscal 2020, which dragged the entire cannabis sector down.

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OrganiGram received a “buy” rating

Amid the negative sentiment, OrganiGram Holdings (OGI) received a “buy” rating from Jefferies on October 11. However, the investment firm lowered its price for the stock from 10.50 Canadian dollars to 8.20 Canadian dollars.

On the same day, Jefferies downgraded Canopy Growth (CGC) (WEED). The investment firm lowered its target price for Hexo, Cronos Group (CRON), and Aurora Cannabis (ACB), as reported by MarketWatch. According to MarketWatch, Jefferies’ analysts wrote in their note to clients that “The next 12 months price performance should see strong divergence between those who can execute/move to profit and the rest.”

Stock performance

Jefferies’ upgrade for OrganiGram Holdings appears to have increased investors’ confidence. On October 11, OrganiGram stock rose to a high of 4.38 Canadian dollars before closing the day at 4.17 Canadian dollars. The stock rose 15.5% from the previous day’s closing price. Despite the increase in OrganiGram’s stock price on Friday, the stock has fallen 13.8% this year as of October 11. During the same period, Canopy Growth, Aurora Cannabis, Hexo, and Cronos Group have lost 29.9%, 28.3%, 27.9%, and 27.9%, respectively.

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Analysts’ ratings

OrganiGram has received increased coverage in the last 12 months. In October 2018, only eight analysts covered the stock. However, as of October 11, 14 analysts cover the stock. Last month, Oppenheimer and CIBC initiated their coverage on the stock with a “buy” rating. CIBC had set a 12-month target price of 9 Canadian dollars.

Analysts are bullish on OrganiGram As of October 11, four analysts had a “strong-buy” rating for the stock, while ten had a “buy” rating. None of the analysts favored a “hold” or “sell” rating for the stock.

Let’s look at analysts’ rating for OrganiGram’s peers:

Analysts’ target price for OrganiGram

Since October 2018, OrganiGram’s consensus target price has increased from 7.84 Canadian dollars to 11.1 Canadian dollars as of October 11. Since June, the company’s target price has fallen marginally from 11.98 Canadian dollars. In October, Jefferies and PI Financials have lowered their target price. On October 11, PI Financials reduced its price target from 12 Canadian dollars to 7 Canadian dollars.

As of October 11, OrganiGram’s consensus target price had a 12-month return potential of 166.1%. On the same day, Canopy Growth, Hexo, Cronos Group, and Aurora Cannabis were trading at a discount of 87.7%, 88.3%, 72.3%, and 88.6% from their respective consensus target prices.

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