Organigram Holdings Inc. (OGI) is the parent company of Organigram Inc., a Canadian producer of medical and adult-use cannabis products.

OGI was founded in 2013 and operates an indoor production facility on a 14-acre campus at its headquarters Moncton, New Brunswick. The company initially focused only on the medical marijuana market and expanded its product line when Canada legalized recreational cannabis commerce in 2018. 

The total Canadian cannabis market is forecast to generate up to C$7 billion in sales this year. OGI’s sales have been exclusively within Canada up until this year, when it announced its first international partnership to supply dried flower to Canndoc Ltd., an Israeli medical cannabis producer.

Here’s how our proprietary POWR Ratings system evaluates OGI:

Trade Grade: D

OGI is currently trading at $1.47, closer to its 52-week low of $1.01 than its 52-week high of $3.64. This might be strange, because OGI has been very busy in 2020 with a flurry of positive activity including its partnership with Canndoc, the launch of several new products including the Edison RE:MIX dissolvable cannabis powder, and its $2.5 million investment in cannabinoid science firm Hyasynth Biologicals Inc. However, none of its recent product announcements or partnerships reanimated the stock, which has been mostly stagnant over the past few months except for a Nov. 9 blip when it announced the release of a pair of limited edition products for the holiday season.

Buy & Hold Grade: F

The stock’s proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, is certainly not in OGI’s favor. Although the company has some good news in its fourth quarter earnings report last month – Q4 2020 net revenue increased 25% to $20.4 million from $16.3 million in Q4 2019 and Q4 2020 gross revenue increased 32% to $25.4 million from $19.2 million in Q4 2019 – that was overshadowed by a Q4 net loss of roughly C$38.6 million, an improvement over the Q3 net loss of C$90 million but still higher than the C$22.5 million recorded in Q4 2019.

Peer Grade: C

OGI is currently ranked #130 out of 240 stocks in the Medical – Pharmaceuticals category. Admittedly, this deck could be considered stacked against a small company like OGI, as the top ranked stocks are multinational corporations offering a diverse array of products. Still, one Canadian cannabis provider, Canopy Growth Corp. (CGC), has cracked the top ten berths, and OGI’s year-to-date change of -42.04% has worked against its efforts to gain respect.

Industry Rank: A

The Medical – Pharmaceuticals industry is ranked #20 out of the 123 StockNews.com industries. OGI is clearly in the right place, but it is still a relatively small player in a field dominated by larger and more successful companies.

Overall POWR Rating: D (Sell)

OGI is rated “Sell” due to a desultory stock performance and a too-far-under-the-radar status within its category.

Bottom Line

During the Q4 earnings call, OGI’s Amy Schwalm, vice president of investor relations, acknowledged the company ran into several potholes during fiscal 2020, including the introduction of 40 new SKUs since July while working with “leaner workforce which not only reduced cultivation levels, but also processing and packaging capacity.” Nonetheless, she promised up to 18 new SKUs in the Q2 fiscal 2021 along with increased consumer research “to help us identify the attributes that cannabis consumers want most.”

During the same call, CEO Greg Engel insisted that OGI’s inroads to Israel could bring it wider international sales, noting the Israeli market offers “potential access to the European market via 

Canndoc as a partner.” As for entering the U.S. market, Engel speculated on potential CBD opportunities as “the way to enter the marketplace in a legal fashion,” adding that federal laws regarding cannabis commerce could change if the Democrats gain control of the U.S. Senate following January’s runoff elections in Georgia.

While OGI’s executives are optimistic for 2021, it clearly has more work to do. Although we recommend keeping an eye on OGI’s progress in the coming year, at this point we don’t believe this is the right time to buy the stock.

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OGI shares were trading at $1.48 per share on Monday morning, up $0.03 (+1.88%). Year-to-date, OGI has declined -39.59%, versus a 16.45% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...

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