Why Does Paradigm Capital Favor OrganiGram Holdings?


Jun. 5 2020, Published 10:54 a.m. ET

After touching a 52-week low of 1.54 Canadian dollars on May 14, OrganiGram Holdings (NASDAQ:OGI) has made a significant recovery by rising over 50% from those lows. The company’s stock price rose due to the expansion of its medical offerings, the amendment of its credit facility with Bank of Montreal, and the strengthening of the broader equity markets. Analysts have expressed bullish views on the stock. At the end of last month, Raymond James reiterated its “buy” rating for the stock and also asked investors to buy on dips. Read Why Is Raymond James Bullish on OrganiGram? to learn more. Meanwhile, Corey Hammill of Paradigm Capital also expressed its bullish view on the company.

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Paradigm Capital is bullish on OrganiGram

Hammill is bullish on the cannabis sector. Earlier this week, he stated that these are interesting times for cannabis companies, as reported by Cantech Letter. He’s excited about the growth of 58% in Canada’s national retail footprint since October 2019. The growth of 184% in Ontario, 135% in British Columbia, and strong growth in Alberta expanded Canada’s retail footprint. He said that cannabis retail sales grew twice as fast as the average over the past 12-months amid COVID-19 restrictions. He thinks that the inelastic nature of cannabis demand has driven cannabis sales.

On OrganiGram, Hammill stated that it produces premium cannabis at a very low cost. The cash cost of producing one gram of cannabis is 0.53 Canadian dollars for OrganiGram, which is lower than its peers. Also, he’s impressed by OrganiGram’s broader reach, development of Cannabis 2.0 products, and its management. Despite these advantages, OrganiGram has underperformed its peers. Also, he thinks that the company is trading at a discount compared to other Canadian cannabis companies and CPG companies. So, Hammill rated the stock as a “buy” with a target price of 4.00 Canadian dollars. The target price represents a 12-month return potential of 68.8%.

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Other analysts’ recommendations for OrganiGram

Overall, analysts are bullish on OrganiGram. Among the 15 analysts, 80% recommend a “buy,” while 20% recommend a “hold.” None of the analysts recommend a “sell.” As of June 5, analysts’ consensus target price was 4.66 Canadian dollars. The target price represents a 12-month return potential of 96.8%.

YTD stock performance

So far this year, OrganiGram has underperformed cannabis ETFs. YTD, the company has lost 25.7% of its stock value, while the Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) has fallen by 13.1% during the same period. The lower-than-expected second-quarter performance and weakness in the cannabis sector dragged OrganiGram stock down. Meanwhile, Aphria (NYSE:APHA), Canopy Growth (TSE:WEED), and Aurora Cannabis (NYSE:ACB) have fallen by 11.8%, 18.0%, and 43.2%, respectively.


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