OrganiGram Holdings Inc: 3 Reasons to Check Out This $1.23 Pot Stock
Is This Pot Stock a Bargain?
If you’ve been following the cannabis industry, you’d know that there are plenty of low-priced pot stocks trading in the market. And this means that, for those who wanted to invest in the industry but thought valuations were a bit high before, now could be the time to take a second look.
OrganiGram Holdings Inc (NASDAQ:OGI) is one of the lower-priced pot stocks—it trades at just $1.23 apiece at the time of this writing. The company is a licensed producer of cannabis and cannabis-derived products in Canada.
Headquartered in Moncton, NB, OrganiGram is listed on the Toronto Stock Exchange and the Nasdaq, so it’s very convenient for both Canadian and American investors to buy its shares. On both exchanges, the company’s ticker symbol is “OGI.”
While OGI stock hasn’t exactly been a hot commodity lately, here are three reasons why it could still be worth considering:
Reason #1: New Value Products
Since Canada legalized recreational cannabis in October 2018, the industry has grown a lot. But, as you’d expect, competition has also intensified. Therefore, one thing that can make a pot brand stand out to consumers is the value it offers.
Right now, OrganiGram has six recreational marijuana brands, three of which are in the value-pricing segment. Notably, the company launched the “SHRED” brand in the Canadian market in September.
Offered in three curated blends, SHRED is a pre-shredded dried-flower product with tetrahydrocannabinol (THC) content of 18% or more. On a per-gram basis, SHRED is OrganiGram’s most affordable option in pre-roll and dried-flower products. (Source: “Organigram Expands Strong Value Portfolio With Launch of SHRED: High Quality, High Potency, Affordable Pre-shredded Dried Flower,” OrganiGram Holdings Inc, September 17, 2020.)
Also, the company’s value strategy extends beyond dried flower. “Cannabis 2.0” products, which include derivatives like edibles, topicals, and vapes, are also legal in Canada now, and OrganiGram is well positioned to capitalize on the new market.
In July 2020, the company launched “Trailblazer Snax”—a value-priced, cannabis-infused chocolate snack that packs in 10 milligrams of THC per 42-gram bar. (Source: “Organigram Launches Trailblazer Snax, the Largest, Competitively Priced Cannabis-Infused Chocolate Bar in Canada,” OrganiGram Holdings Inc, July 28, 2020.)
Reason #2: International Presence
Although OrganiGram is a relatively small pot stock, the company actually managed to sell its products beyond the Canadian market.
In June, it entered a multi-year agreement to supply dried flower to one of the largest and most established medical pot producers in Israel—Canndoc Ltd, which is a subsidiary of InterCure Ltd (TLV:INCR, OTCMKTS:IRCLF). (Source: “Organigram and Canndoc Sign International Strategic Agreement,” OrganiGram Holdings Inc, June 9, 2020.)
Under the agreement, OrganiGram will supply 3,000 kilograms (6,614 pounds) of dried-flower product to Canndoc by December 31, 2021, for processing and distribution into the Israeli medical cannabis market. Canndoc has the option to ask OrganiGram to provide an additional 3,000 kilograms (6,614 pounds) of dried flower during the same period.
OrganiGram sent the first shipment of bulk dried flower to Canndoc in August 2020.
Reason #3: Tightening the Belt
Now, we know that due to increasing competition and the impact from the COVID-19 pandemic, the outlook has changed for a lot of Canadian pot producers. The good news is, OrganiGram Holdings Inc was quick to adapt to the new operating environment.
In particular, the company has been tightening its belt. OrganiGram reduced its workforce by approximately 25% in June. (Source: “Organigram Provides Update on COVID-19 Corporate Action Plan and Timing for Q3 Results,” OrganiGram Holdings Inc, July 3, 2020.)
At the same time, the company has revised its target production capacity from 89,000 kilograms (196,211 pounds) per year to 70,000 kilograms (154,324 pounds) per year. (Source: “OGI Investor Presentation,” OrganiGram Holdings Inc, last accessed October 26, 2020.)
Furthermore, the company only needs about $4.0 million in expansion capital expenditures to complete its plans for Phase 4 and Phase 5 of its Moncton Campus Facility.
To put that in perspective, in the third quarter of OrganiGram’s fiscal year 2020, which ended May 31, it generated $8.5 million in cash flow from operations. (Source: “Organigram Reports Third Quarter Fiscal 2020 Results,” OrganiGram Holdings Inc, July 21, 2020.)
OrganiGram Holdings Inc (NASDAQ:OGI) Stock Chart
Chart courtesy of StockCharts.com
Analyst Take
Ultimately, I would not call OrganiGram stock a slam dunk. In the company’s most recently reported fiscal quarter, its net revenue declined 27% year-over-year to $18.0 million. Meanwhile, both its net loss and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss widened quite a bit.
Still, with a revitalized product portfolio and cost-reduction measures, OrganiGram could make a turnaround. As it stands, OGI deserves a spot on pot stock investors’ watch lists.
