OrganiGram: Analysts’ Ratings and Target Prices after Q1 Earnings

As of Monday, OrganiGram Holdings (NASDAQ:OGI) was trading at 4.21 Canadian dollars—a rise of 49.8% since reporting its first-quarter earnings on January 14. During the quarter, the company posted revenue of 25.2 million Canadian dollars, which beat analysts’ expectations by 28.6%. After reporting a negative EBITDA in the third and fourth quarters of fiscal 2019, the company returned to profitability. OrganiGram reported an EBITDA of 4.9 million Canadian dollars. To learn more, read OrganiGram Posts Incredible Q1 Results, Solid Outlook.

On January 16, OrganiGram also announced that it had signed a supply agreement with Shoppers. According to the agreement, OrganiGram will supply a wide variety of medical products, like dried flowers, oils, and other derivative products to Shoppers. The companies signed the agreement for three years with an option to renew for two years. All of these announcements caused OrganiGram’s stock price to rise. Let’s look at analysts’ recommendations and target prices.

OrganiGram: Analysts’ Ratings and Target Prices after Q1 Earnings

Analysts’ target price for OrganiGram

Since OrganiGram reported its first-quarter earnings, Jefferies has raised its target price from 5 Canadian dollars to 5.5 Canadian dollars. As of Monday, analysts’ consensus target price was 6.28 Canadian dollars. The target price implies a return potential of 49.3% from the target price of 4.21 Canadian dollars.

However, in the above graph, you can see that analysts’ consensus target price has declined since last month. On December 20, analysts’ consensus target price was 7.41 Canadian dollars, which represents a fall of 15.2%. Before the announcement of the first-quarter earnings, Haywood Securities and Jefferies reduced their target prices. On January 6, Haywood Securities lowered its target price from 7.50 Canadian dollars to 6.50 Canadian dollars. On January 2, Jefferies cut its target price from 8.20 Canadian dollars to 5.0 Canadian dollars. The price cuts reduced analysts’ consensus target price.

As of Monday, Aphria (NYSE:APHA), HEXO (TSE:HEXO), and Aurora Cannabis (NYSE:ACB) were trading at a discount of 73.2%, 26.8%, and 65.2% from their respective target prices.

Analysts’ opinions on OrganiGram

After OrganiGram reported a positive EBITDA, Owen Bennett of Jefferies stated that the old OrganiGram had returned, as reported by MarketWatch. He said that the company’s impressive first-quarter revenue supported Jefferies’ confidence. The firm considers OrganiGram to be one of the preferred stocks in the cannabis sector.

As reported by MarketWatch, John Zamparo and Krishna Ruthnum of CIBC stated that the first-quarter numbers were very encouraging, especially in a challenging environment. In the client note, they said, “Our only concerns out of the quarter are a capital projects to-do list that should see spending remain stubbornly high, and questionable timing of equity financing.” CIBC has reiterated its “buy” rating and a target price of 5 Canadian dollars.

Analysts’ ratings

After OrganiGram reported its first-quarter earnings, there weren’t any rating changes. However, in the above graph, you can see that there was a downgrade in the last 30 days. On January 9, before the company reported its first-quarter earnings, Raymond James downgraded OrganiGram from “outperform” to “market perform.” In the above graph, you can see that OrganiGram has received increased coverage in the last 12 months. In January 2019, nine analysts covered the stock. Meanwhile, 16 analysts cover the stock as of Monday. Among the analysts, 12 recommend a “buy,” three recommend a “hold,” and one recommends a “sell” rating.

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

  • Analysts are bullish on Aphria. Among the 14 analysts, ten recommend a “buy” rating. To learn more, read Aphria’s Ratings and Target Prices after Q2 Earnings.
  • Among the 15 analysts that follow HEXO, only three analysts favor a “buy” rating. Among the remaining 12 analysts, six recommend a “hold” rating, while six recommend a “sell” rating.
  • For Aurora Cannabis, eight of the 20 analysts recommend a “buy.” rating. Among the remaining 12 analysts, seven recommend a “hold” rating, while five recommend a “sell” rating. Read Why Is Cowen Still Bullish on Aurora Cannabis? to learn more.

Analysts’ expectations

For fiscal 2020, analysts expect OrganiGram to report revenue of 129.1 million Canadian dollars—a rise of 60.6% from 80.4 million Canadian dollars. The company’s revenue could increase due to the introduction of Cannabis 2.0 products and Canadian provinces’ expanding their retail footprint. Also, analysts expect the company to report an EBITDA of 22.2 million Canadian dollars for the same period, which represents 11.5% growth YoY.