This Top Marijuana Penny Stock Could Deliver Exponential Gains in 2018

OrganiGram stock

This Cheap Marijuana Stock Is All Set to Soar in 2018

Early investors of pot stocks struck it rich by merely investing in cheap penny stocks that had the potential to multiply. I can count at least four such marijuana stocks that have more than tripled in value in just under a year. So I’ve desperately been on the lookout for cheap opportunities that can replicate similar returns. The good news is, I may have finally scored a potential multibagger.

This cheap marijuana penny stock keeps a low profile. Not many sitting in the U.S. have heard of this relatively small Canadian pot grower. A key reason why it doesn’t get too much press coverage is because this stock trades on the Toronto Exchange’s Ventures arm. This basically means it is still too small to graduate to the main exchange where only four of Canada’s largest marijuana companies have succeeded to secure a seat.

Mind you, having a spot on the Toronto Exchange lends a stock more visibility. In other words, this is one reason holding back this stock’s price. To gauge why this matters, just compare a stock trading on the New York Stock Exchange (NYSE) with one selling over the counter.

However, at the pace this marijuana company is growing, it won’t be too long before it lands on the country’s major exchange. Here’s why I believe that day is not too far in time.

Why This Marijuana Penny Stock May Be a Multibagger

If you pan over Canada’s map highlighting the licensed producers (LPs) of marijuana, you’ll see clusters of red in Central Canada and smaller clusters in Western Canada. The East Coast of Canada has a dearth of marijuana growers. This is where my pick for today comes in.

“Available coast to coast” is the tagline this marijuana company is using to market its products. And holding true to that promise, this marijuana company has begun setting up its camps, beginning with its home ground in Canada’s maritime provinces.

The Canadian Maritimes include the provinces of New Brunswick, Prince Edward Island, and Nova Scotia. They cover part of Canada’s east coast where local marijuana growers are few and far between.

The company in question is based in New Brunswick and has just entered into a deal with the provincial governments of New Brunswick and Prince Edward Island to supply marijuana ahead of Canada’s legalization day.

This Marijuana Company to See Its Revenue Surge Multifold in 2018

The company is OrganiGram Holdings Inc (CVE: OGI), (OTCMKTS: OGRMF) — a small marijuana grower and seller based in Moncton—which produces dried Cannabis as well as derivative products like oils and capsules for patients.

Just last week, the company has entered into an agreement with the Government of Prince Edward Island to supply recreational marijuana in the province just as the country prepares to legalize the drug for adult use.

As part of the signed memorandum of understanding (MOU), the province will be procuring a minimum of one thousand kilograms of cannabis from OrganiGram annually.

The province would be selling this weed through its government-owned retail outlets, in addition to the stores that fall under the province’s Liquor Control Commission.

The only other external supplier the province has signed up with is Canopy Growth Corp (TSE: WEED), (OTCMKTS: TWMJF)—the largest marijuana producer in the country. The province is severely deficient in local growers.

As of now, only one marijuana company is licensed to produce within the province, that is Canada’s Island Garden Inc., which is a small local grower and is not a publicly traded company. So OrganiGram is one of the only two notable companies serving all of Prince Edward Island.

The price at which OrganiGram will be supplying the weed has not been disclosed. However, based on the average retail price of $10.00 per gram suggested by the federal government, the province stands to make about $10.0 million in sales from the cannabis bought from OrgraniGram. So expect this deal to add multi-millions to OgraniGram’s coffers.

Wait, there’s more.

Prior to this deal, OrganiGram signed a similar deal with the Government of New Brunswick, where it’s based. Under that MOU, the province would be buying a minimum of 5,000 kilograms of marijuana from the producer. That’s exactly five times of what the government of Prince Edward Island has promised to buy!

Again, at the average price of $10.00, this amounts to $50.0 million in New Brunswick’s annual marijuana sales. That’s more than five times OgraniGram’s own annual sales. So, simply put, OrganiGram is about to witness a substantial surge in its revenue. (Source: “Organigram signs MOU with Government of Prince Edward Island for the distribution of cannabis to the province’s adult recreational market,” OrganiGram, January 16, 2018.)

To be precise, OrganiGram made sales worth $7.74 million in the most recent fiscal year of 2017. However, with these two deals, OrganiGram’s annual revenue will multiply manifold.

Now, there’s another reason why OrganiGram piqued my interest. This small company could make for a great acquisition target for one of the major marijuana players competing with Canopy Growth, like Aurora Cannabis Inc (TSE: ACB), (OTCMKTS: ACBFF) and Aphria Inc (TSE: APH), (OTCMKTS: APHQF). I’ve discussed these prospects in greater detail here.

With a plethora of new marijuana players thronging the market, this industry will soon get saturated. Most marijuana companies are already piling losses and it’s easy to predict that not many of these companies will be around two to five years down the road. Consolidation will become their only source of survival.

OrganiGram is one marijuana company which, because of its unique location, may find many suitors. Empirically speaking, penny stocks that get acquired deliver exponential returns.

To sum it all up, this is one marijuana penny stock you may not want to let slip under the radar.

Analyst Take

We’re counting down the days to Canada’s full legalization day and all eyes are turned toward the top marijuana stocks. At this point, cheap marijuana stocks that actually have the potential to grow are like gold dust.

However, we must warn our readers that the marijuana industry is fraught with risk. Stocks are trading at lofty high price multiples and their values are largely based on speculation.

My bullish take on OrganiGram is partly based on fundamentals. The substantial revenue growth we’re about to witness can’t be ignored. However, part of my thesis is also based on speculation that this company may eventually get acquired. I could be right. I could also be wrong. So investors must perform their due diligence before investing.

Having said that, I maintain that, in my view, OrganiGram is the top marijuana penny stock to watch right now because this pot stock may be setting up for a big rally in 2018.