Cannabis company Organigram Holdings Inc. OGI OGI posted second-quarter earnings last week, with gross revenue dropping 29% year-over-year to around CA$19.3 million ($15.4 million).
Net revenue for the period also went down from CA$23.2 million to CA$14.6 million.
The Organigram Analyst
Cantor Fitzgerald’s Pablo Zuanic maintained an Overweight rating on Organigram and raised the price target from CA$6 to CA$6.15.
The Organigram Takeaways
The cannabis company's second-quarter results were worse than projected, with the COVID-19 pandemic affecting sales trends at the point of sale and adult-use sales being affected by capacity constraints Zuanic said in a Wednesday note.
While Aphria Inc. APHA APHA adult-use sales before taxes dropped 17% to roughly CA$60 million in the February quarter, Organigram’s fell 27% to CA$16.5 million, the analyst said.
“Although it did not give guidance, management pointed to improved sales trends for the May quarter,” he said, adding that the "depression" in the cannabis sector may help advance month-to-month figures.
Organigram projected an improvement in profit margins, Zuanic said.
Related content: Benzinga's Full Analyst Ratings Calendar
The analyst praised the company's board destocking move, explaining: “On the new fully diluted share count we calculate OGI.TO trades at a compelling 5.7x CY22 EV/Sales.”
Organigram’s international outlook stands out from comparable peers, with the August quarter's $2.6-million shipment to Israel being “sold out in weeks,” he said.
What’s more, Zuanic said the company is ahead of the competition when it comes to innovation activities and indoor quality cultivation.
“Taking the fully diluted share count at 324.8mn (common 298.2Mn) and the share price as of 12pm of C$3.50, yields a market cap of $1,136Mn.”
With sales trends improving, this may be a good time to buy Organigram shares, according to Cantor Fitzgerald.
OGI Price Action
Organigram shares were down 1.18% at $2.52 at the close Thursday.
Photo by Teanna Morgan on Unsplash.
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