Organigram’s Q1 Net Revenue Jumped 102% Lifting Shares of OGI Stock 44% Today While Pot Stocks Across the Board Soared
This Reliable Technical Indicator Signalled the Reversal of OGI’s Downtrend 2 Days Ago
Organigram Holdings (TSX: OGI) (NASDAQ: OGI) (FRA: 0OG) announced earnings for the first quarter ended November 30, 2019, yesterday after the closing bell. The company reported strong revenue growth which included Gross Revenue of $28.45 million, up 96% over the previous year. Q1 2020 Net Revenue was $25.2 million, up 102% from the $12.4 million recorded in Q1 2019.
Gross Margin for the first-quarter 2020 was $11.2 million, down from the $51.7 million posted last year. The company cited a year over year decrease in its non-cash fair value gain on biological assets and inventories sold from $42.9 million in Q1 2019 to $1.9 million in Q1 2020.
Organigram reported Gross Margin Before Fair Value Changes to Biological Assets and Inventories Sold of $9.3 million or 37% of net revenue for the first quarter 2020 compared to last year’s $8.8 million or 71% of net revenue.
Adjusted EBITDA declined 29% year over year from $6.8 million to $4.9 million in Q1 2020. The company blamed a rise in SG&A costs for the drop in Adjusted EBITDA. SG&A Costs for Q1 2020 more than doubled to $9.4 million compared to $4.5 million last year as the company ramped up for adult-use legalization in Canada.
Organigram reported a Q1 2020 Net Loss of $0.9 million or $0.006 per fully diluted share. In the first quarter of 2019, the company posted net income of $29.5 million or $0.195 per share which was mostly a result of its non-cash fair value changes to biological assets and inventories sold.
At the end of Q1 2020, Organigram had $34.1 million in Cash and Cash Equivalents. The company also reported having roughly $84.5 million in Current and Long-Term Debt at the end of Q1 2020. Much of the company’s debt is connected to its BMO Credit Facility which as of yesterday, still had $30 million in available funds. Organigram also has access to an additional $25 million in capital via a Revolver Loan that can be drawn down against specified receivables.
“Despite ongoing industry challenges, we are pleased with solid Q1 2020 results and our return to positive adjusted EBITDA during the quarter. Our team was also successful in shipping the first of our Rec 2.0 products as planned and on schedule in December of 2019. We also look forward to the launch of the remainder of our vape pen portfolio followed soon after by our premium cannabis-infused chocolate products. In addition to an exciting line-up of 2.0 products, we are rolling out a couple of new core strains, such as our high THC Edison Limelight, across the country following their success as limited-time-offers in smaller markets,” stated Organigram CEO Greg Engel.
Moving forward, Organigram is focused on continued expansion and the successful launch of the company’s Cannabis 2.0 line up of Edibles and vape pens. On December 17, 2019, the company shipped the first batch of its Trailblazer Torch vape cartridges and will follow that up by launching its Edison + Feather ready-to-go distillate pens and Edison + PAX ERA distillate cartridges in Q1 and Q2 2020.
Organigram is optimistic about the Canadian cannabis market and believes the industry is poised for strong growth as more retail stores are added in Canada’s largest province of Ontario as well as Quebec.
Organigram Q1 2020 Earnings Call
OGI Stock Price Action & Chart
Shares of Organigram’s TSX listed stock soared 44.13% today to close the trading session at $4.05 per share. OGI stock experienced a massive surge in volume finishing the day with over 16.2 million shares traded worth almost $63 million. South of the border, the company’s U.S. NASDAQ listed stock closed trading today at $3.14 per share, up 45.37% on the day. Overseas on the Frankfurt Stock Exchange, Organigram’s German listed shares closed trading today at $2.79, up 47.17%.
As we reported last week, OGI stock currently has a price target of $9 per share. As of today’s closing price, OGI still has an implied upside of 122.22% from these levels. We also reported that analyst Rahul Sarugaser of Raymond James downgraded shares of OGI from ‘Outperform 2’ to ‘Market Perform 3’. It’s possible that Mr. Sarugaser could reverse his decision and upgrade OGI shares in Q1 or Q2 2020.
As you will see on the chart below, OGI completed a different bottom reversal formation than the Inverse Head and Shoulder pattern we reported on with Canopy Growth’s (TSX: WEED) (NYSE: CGC) (FRA: 11L1) recent breakout. OGI stock experienced something called Bullish Divergence when the stock hit a new low of $2.47 on January 13th but its RSI technical indicator failed to make a new low as well. This Bullish Divergence signals a change in the momentum of the stock and the likely end of its downtrend and beginning of a new uptrend.
At its peak today, OGI stock was up as much as 50.53% as investor enthusiasm continues to roar back to life in the cannabis sector. So far in 2020, quality pot stocks across the board are up substantially. Today alone, the following marijuana stocks posted double-digit gains:
- Supreme Cannabis (TSX: FIRE) (OTCQX: SPRWF) (FRA: 53S1) | +18.8%
- Charlottes Web (TSX: CWEB) (OTCQX: CWBHF) | +17.3%
- HEXO Corp. (TSX: HEXO) (NYSE: HEXO) (FRA: 74H) | +15.9%
- Aurora Cannabis (TSX: ACB) (NYSE: ACB) (FRA: 21P) | +15.5%
- Village Farms (TSX: VFF) (NASDAQ: VFF) (FRA: 02V) | +15.1%
- Acreage Holdings (CSE: ACRG.U) (OTCQX: ACRGF) (FRA: 0VZ) | +14%
- Canopy Rivers (TSX: RIV) (OTCPK: CNPOF) | +13.3%
- Emerald Health (TSXV: EMH) (OTCQX: EMHTF) (FRA: TBD) | +12.9%
- Hollister Biosciences (CSE: HOLL) (FRA: HOB) | +10.7%
- SOL Global (CSE: SOL) (OTCPK: SOLCF) (FRA: 9SB) | +10.6%
- Auxly Cannabis (TSXV: XLY) (OTCQX: CBWTF) (FRA: 3KF) | +10%
Disclosure: The Cannabis Investor does not hold a position in any of the stocks mentioned in this article.