OGI Stock Forecast: Is OrganiGram the Best Takeover Target Post-Positive Q1 Earnings?

OGI Stock
iStock.com/Natee Meepian

OGI Stock Forecast: Is an Acquisition in Its Future?

Following a strong showing in the first quarter of 2018, OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI) may have been added to the shopping list of a number of larger, hungrier companies in the marijuana market.

As we near legalization in Canada and money continues to pour into pot, we’re going to see an effort to consolidate companies, with the biggest players trying to stake out as large a claim as possible to the overall market by acquiring smaller companies. OrganiGram Holdings stock may be the next to be gobbled up.

With the OrganiGram stock news being positive following strong Q1 earnings and the OGI stock forecast looking strong, it would make sense that some larger players may seek to add the penny stock to the fold.

With all that said, let’s take a look at why companies may look to purchase it.

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OrganiGram Q1 Earnings Report

The OrganiGram financials were rather exceptional, hitting a number of important milestones.

The company netted its all-time high in quarterly sales, at $2.7 million, up from $2.1 million last quarter and $2.2 million a year before.

OrganiGram also saw its net losses decrease to $1.4 million, down from $2.0 million in the previous quarter. Check out the table below (all figures in Canadian dollars):

Q1 – 2018 Q4 – 2017 Q1 – 2017
Net Sales $2.7 million $2.1 million $2.2 million
Net Loss $1.4 million $2.0 million $0.8 million
Dried Flower Sales (Grams) 195,000 187,000 260,000
Cannabis Oil Sales (Milliliters) 419,000 178,000 77,000

“What is clear is that through a dogged commitment to product quality and innovation, we have built and are sustaining tremendous momentum,” said Greg Engel, CEO of OrganiGram Holdings Inc. “We have been patient but determined in building a world-class facility imagined and supported by a world-class team. We are proud that our customers are recognizing and enjoying the results of that vision.” (Source: “OrganiGram Reports Record Net Sales, Record Cannabis Oil Sales and Increased Number of Registered Medical Patients,” Cision, January 29, 2018.)

The “dogged commitment” is important to note in the statement, as the company faced a legal battle last year.

While perhaps not a direct reference to the OrganiGram recall lawsuit in 2017, it’s important to note that OrganiGram did find itself in court in 2017 over claims that unapproved pesticides were found in the company’s products. (Source: “NB marijuana producer Organigram hires law firm to battle class-action lawsuit,Global News, March 8, 2017.)

OrganiGram, for its part, denied the allegations, and the argument was then taken to court.

But if the company’s strong financials are anything to go by, the lawsuit has hardly impacted its growth.

Meanwhile, the stock price continues to fluctuate along with most of the marijuana industry, as January and February have proven to be fickle, uncertain months.

As for the OGI stock outlook, the company is currently in the midst of what it calls a “Phase 3” expansion, looking to increase production by 9,000 kg/year in May 2018 to 25,000 kg/year total.

“Phase 4” will then see that production rise to 65,000 kg/year when completed.

When all is said and done, OrganiGram will be one of the top indoor cannabis producers in Canada.

This brings us to why companies would look to acquire the marijuana penny stock.

With strong growth, eyes toward expansion, and an explosion in big-name acquisitions lately, there is a good chance that OrganiGram may have become an acquisition target to other companies in the industry.

Analyst Take:

Acquisition or no, OrganiGram’s financials are still very positive. While an acquisition will likely spur on an OGI stock boost, there’s nothing but rumors to go off of at the moment.

In any case, for those looking to acquire a smaller-cap marijuana penny stock, investors have plenty of reasons to be interested in OrganiGram.