OrganiGram Q1 2019 Financial Report
The theme last year in the marijuana industry was big partnerships (alcohol, tobacco, soft drinks, etc.), with these seismic events often being the catalysts for huge stock gains.
In 2019—at least in the beginning—it’s going to be the financial reports that shift the market, with OrganiGram Holdings Inc (OTCMKTS:OGRMF, CVE:OGI) marking the first big move in the industry.
OrganiGram stock catapulted by 22% in the two days following the release of its latest earnings report.
The stellar OrganiGram Q1 2019 financial report showed massive growth across the board for what was an already very impressive company.
OrganiGram’s net sales for the quarter hit CA$12.4 million, up from CA$2.4 million in the same prior-year period and up from CA$3.2 million in Q4 2018. That represents a 419% and 287% jump, respectively. (Source: “OrganiGram Reports Record Net Revenue of $12.4 Million Up 287% Sequentially Quarter-over-Quarter; Adjusted Gross Margin of 71%,” OrganiGram Holdings Inc, January 28, 2019.)
Net income similarly grew, hitting CA$29.5 million (CA$0.195 per diluted share). This is a stark contrast to its net loss of CA$1.2 million ($0.012 per diluted share) last year.
So what’s motivating the massive progress we saw in the OrganiGram Q1 2019 financial report? Easy: Canadian marijuana legalization.
The first quarter of 2019 covered the three-month period ended November 30, 2018. So the fantastic numbers are from just a month of legal recreational marijuana in Canada.
In fact, OrganiGram wrote in its report that it fully expects Q2 2019 to have at least double the net revenue of the first quarter, a bold and impressive claim. That makes sense though. After all, it will be the first quarter that falls fully within Canadian marijuana legalization.
This means we can expect these numbers to swell in the next quarter—not only because it will be the first full quarter with legalization on the books in Canada, but also because the shortage problem that plagued the Canadian marijuana market (and still does, to an extent) will ease with time.
As such, the deeper we go into legalization, the better the numbers we can expect as the logistics are sorted out. Remember that several provinces have implemented measures to help deal with the supply deficit. And of course, Ontario hasn’t even begun selling marijuana from legal storefronts yet.
I’ve loved this marijuana penny stock for a long time, and these numbers are fantastic. That is without dispute, and it’s great for OrganiGram stock.
Later we’ll get to what this means for OGRMF stock moving forward, but first, let’s take a look at what this means for the marijuana industry more broadly.
Canadian Marijuana Sales
To start the year, we’ve seen the first figures released from Canada regarding legal weed sales—and they’re good. Really good.
The OrganiGram Q1 2019 financial report further cements the fact that marijuana legalization in Canada is going strong.
In late 2018, I predicted that strong sales would help drive financial reports and send stocks soaring. So far, that’s gone about as exactly as I anticipated. Considering I’ve been a longtime supporter of OGRMF stock, investors who have been readers of mine probably were quite happy with today’s results.
But more importantly, this is just the tip of the iceberg.
Marijuana stocks are likely going to see the Canadian marijuana legalization bump take effect for the next few quarters, leading to huge jumps in value across the board.
This is especially important since there isn’t a whole lot else on the horizon in 2019 for pot stocks—at least not yet.
Last year had marijuana investors eagerly awaiting legalization in Canada. Other major events also took place (Big Alcohol and Big Tobacco partnerships, for example), but they weren’t guaranteed. They weren’t exactly big surprises, but neither were they certainties.
This year holds no such big event. There’s no further legalization on the way, no major vote, no big marijuana news event to help push sales.
That means investors will need to look elsewhere to predict big market moves. These quarterly reports are a perfect place to start.
As the next several quarterly reports come out, expect to see them get progressively stronger. Depending on how analysts react (hopefully they underestimate just how great marijuana is doing in Canada and keep expectations low), we could see several big gains among top pot stocks in 2019.
Couple that with the maturation of the Canadian recreational marijuana market that will naturally increase sales (as well as a number of strong upcoming events), and investors can benefit in 2019.
OrganiGram Stock Prediction
Now let’s get back to OrganiGram stock.
OrganiGram is one of the few marijuana stocks largely thought to be undervalued. Considering that most pot companies are considered to be quite the opposite, that’s a huge advantage for OGRMF stock.
Aside from the very impressive numbers we saw in the quarterly report, the company also made strong strides on fundamentals.
Expansions are taking place at the Moncton, New Brunswick campus, bringing the company’s target production capacity to 113,000 kilograms per year by fall 2019. (Source: Ibid.)
Furthermore, the company is looking to ink a deal in Quebec, which, if completed, would mean that this marijuana penny stock would have operations in all 10 Canadian provinces.
Overall, it’s hard not to be bullish on OrganiGram stock. The past month has seen growth top 71%, and in my mind, that’s just the tip of the iceberg.
There is so much that OGRMF stock can do to boost its share price—from being the target of an acquisition to listing on the New York Stock Exchange (NYSE) or Nasdaq to signing a big partnership with another company—that I don’t think the gains will halt here.
In fact, I fully expect to see OrganiGram stock hit between 50% and 100% gains by the end of the year.
Chart courtesy of StockCharts.com/
This year may not have as many sexy headlines as 2018 when it comes to the marijuana industry. But as the OrganiGram Q1 2019 financial report shows, sometimes it’s not sexy headlines that win the day; it’s good ol’ fashioned fundamentals and sales numbers.
In this case, OGRMF stock has those in spades. The rest of the industry is also likely to see a huge windfall when more quarterly reports roll in and finally deliver on the promise of a fully legalized marijuana market.