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OrganiGram: Analysts Revise 2020 Estimates in April


Apr. 9 2020, Published 10:48 a.m. ET

OrganiGram (NASDAQ:OGI) is one of the cannabis stocks that has kept its momentum going despite various challenges. Other cannabis stocks have been struggling for a while now. Most of them reported disappointing results. However, OrganiGram’s results for the first quarter of fiscal 2020 were impressive. The company is in a slightly better position to survive the COVID-19 storm compared to its peers. However, looking at the current scenario, analysts have revised OrganiGram’s fiscal 2020 estimates in April.

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Analysts revise Organigram’s estimates in April

Analysts have lowered the revenue estimates for OrganiGram for fiscal 2020. For fiscal 2020, analysts expect the revenue to be around 127 million Canadian dollars. In March, the estimate was 131 million Canadian dollars. Analysts even lowered the revenue estimates slightly for fiscal 2021 and fiscal 2022.

For fiscal 2021, analysts expect the revenue to be around 208 million Canadian dollars. In March, the estimate was 215 million Canadian dollars. For fiscal 2022, the revenue estimate is 213 million Canadian dollars compared to 218 million Canadian dollars in March.

The company is still expected to report a positive EBITDA in fiscal 2020. However, the estimate is lower at 29 million Canadian dollars compared to 31 million Canadian dollars in March. For fiscal 2021, the estimate is now 63 million Canadian dollars compared to 66 million Canadian dollars.

OrganiGram will report its results for the second quarter of fiscal 2020 this month—likely by next week, according to predictions. Analysts expect the company to report a slight year-over-year decline in revenue of 3.0% to 26.1 million Canadian dollars. The EBITDA will be positive in the second quarter. However, analysts expect the company to report a lower EBITDA of 2.8 million Canadian dollars compared to 6.9 million Canadian dollars in the second quarter of 2019.

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Why the revision in April?

OrganiGram reported double-digit revenue growth in the first quarter. The company also beat analysts’ revenue estimates. Among cannabis companies, OrganiGram and Aphria (NYSE:APHA) continued to earn a positive EBITDA. The companies have been smarter in handling their cash positions. They have been dealing with the same factors that impacted the other cannabis companies. OrganiGram reported a positive EBITDA of 4.9 million Canadian dollars in the first quarter.

However, the COVID-19 pandemic is a rare crisis. There was hope that Cannabis 2.0 product growth would help cannabis companies this year. The pandemic has caused a surge in marijuana sales. However, we don’t know if the sales will be consistent. Also, Canada’s largest market for recreational cannabis sales has announced that adult-use cannabis isn’t an essential item now. The sales have stopped from private stores, which will definitely impact Canadian cannabis companies. Production continues for many cannabis companies but it’s hard to determine the overall impact of COVID-19.

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Like other marijuana companies, OrganiGram is dealing with the COVID-19 crisis in its own way. The company announced a reduction of 45% in its workforce to maintain social distancing and preserve cash amid the outbreak. I think that analysts might have lowered OrganiGram’s estimates due to all of these factors. Analysts have also revised the estimates for Tilray (NASDAQ:TLRY) and Cronos Group (NASDAQ:CRON) in April based on the COVID-19 scenario and other factors impacting the cannabis sector.

OrganiGram and peers’ stock performance

Last month, Bank of America upgraded OrganiGram and Aphria based on the demand for cannabis, which helped the stock. OrganiGram stock still has eight “buy” ratings and four “strong-buy” ratings from the 16 analysts that cover the stock.

Cannabis stocks have been performing well this month due to rising marijuana sales amid the pandemic. OrganiGram closed with a gain of 6.4% on Wednesday, while Aphria, Cronos Group, and Tilray closed with gains of 4.9%, 8.0%, and 9.5%. However, Hexo fell by 24.9% on Wednesday. To learn more, read Hexo Looks to Raise Additional Capital amid Falling Stock.

Read Will the Marijuana Industry Survive COVID-19? to learn more about the marijuana industry amid COVID-19.


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