Is OrganiGram a BUY Ahead of Q3 Results?

OrganiGram Holdings (NASDAQ: OGI) is all set to announce its third-quarter results on July 21 after its weak second-quarter numbers left investors unimpressed in April. The hemp stock has lost nearly 37% of its value in 2020 and the company also postponed its earnings release by a week due to the impact of the COVID-19 pandemic. With the marijuana stocks struggling this year, let us discuss the possibilities of an OrganiGram investment in detail to see if this marijuana stock is a BUY ahead of tomorrow’s Q3 results.

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Organigram expects lower revenue amid pandemic disruptions

Like most of the world, OrganiGram is rather worried about its Q3 results as coronavirus wreaked havoc for pot retailers. OrganiGram has temporarily laid off 25% of its workforce and expects a one-time charge of $0.6 million for the same. The Moncton-based cannabis producer isn’t quite upbeat about its revenue either. It expects the revenue to be sequentially lower amid weakness in the wholesale segment. The hemp stock is also grappling with reduced production in its Moncton facility amid lower demand.

Its second-quarter numbers were disappointing. The net revenue plunged 14% year-over-year to CA$23.2 million, while its loss deepened to CA$6.8 million. OrganiGram’s cash position of CA$41.1 million isn’t very impressive considering the cash burn in the last quarter. However, OGI expects lower SG&A expenses amid workforce reduction. Let us see if that has any material impact on its cash or steers the company towards profitability.

Impressive brand equity and product portfolio

OrganiGram is likely to benefit from its brand-building initiatives as well as a differentiated product portfolio. In May, the company introduced a lot of products in the Cannabis 2.0 adult-use recreational segment.

This includes the ready-to-use Edison-branded products. In this quarter, the pot producer also added Trailer Park Buds to its adult-use consumer brand. OrganiGram has El Dorado as the latest offering in its hybrid categories. We are eager to see if the impact of these unique offerings offsets any pandemic-led disruptions in the company’s operations.

Haywood analyst slashes price target, but upbeat on the stock

Earlier this week, Haywood Capital’s analyst, Neal Gilmer lowered his target price on the stock to CA$3.5 from CA$4.25. However, the analyst maintained a ‘Buy’ rating on the stock. Gilmer expects the revenue for Q3 to come in at CA$ 20 million, lower than consensus estimates. Meanwhile, the EBITDA loss is likely to be CA$1.1 million, as opposed to the consensus forecast of a positive $0.3 million.

Gilmer is upbeat on the stock amid prospects of its international as well as domestic expansion. He also expects more retail outlets to open in Ontario that will meet the growing demand. The analyst expects the hemp stock to benefit from its unique product portfolio, and may even outperform its peers.

A cautious approach ideal for OrganiGram investors

We believe the next few months are quite crucial for OrganiGram. Its financials will be closely watched and investors aren’t likely to react well if the Q3 numbers are weaker-than-expected. However, the hemp stock has carved out a niche through specialized products and that is likely to boost its position. It is better to be cautious about OrganiGram in the present situation and wait for more operational updates from the management.

Is OrganiGram a BUY Ahead of Q3 Results?

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Is OrganiGram a BUY Ahead of Q3 Results?