Bear of the Day: OrganiGram Holdings (OGI)

OrganiGram Holdings (OGI) is a Canadian-based medical cannabis company that sells to both individuals and physicians. The company also operates healing centers that focus on treating post-traumatic stress disorder and chronic pain, as well as providing trauma therapy.

Q3 Earnings Recap

OrganiGram’s top and bottom lines lagged behind the consensus estimate and fell significantly year-over-year. Revenue was CA$18 million, or $13.3 million, while its net loss came to CA$0.51, or ($0.38) per share.

Shares plunged over 9% after its earnings report was released.

Management attributed these weaker-than-expected results to recent job cuts (about 25% of its workforce). This “contributed to a number of product launch delays, including our initial large format value offering, which affected opportunities to potentially capture significant market share and sales in dried flower, the largest product segment of the recreational market,” said the company.

OrganiGram also had to write off CA$19.3 million of inventory that couldn’t be sold in time during the quarter.

Bottom Line

OGI is now a Zacks Rank #5 (Strong Sell).

One analyst has cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen nine cents to a loss of $0.40 per share; earnings are expected to see a triple-digit decline for fiscal 2020.

Shares have fallen more than 30% since the March lows, lagging the S&P 500’s 44+% rebound during the same time frame.

Going forward, OGI has a long road ahead of it. Total net loss reached almost CA$90 million last quarter, and the company only has CA$78 million cash and investments on hand. Even though the company is optimistic about new product launches and expansions, potential investors may want to stay clear until OrganiGram can reverse falling revenue and profits.

Investors who are interested in adding a cannabis company to their portfolio could consider marijuana REIT Innovative Industrial Properties (IIPR). IIPR is a #3 (Hold) on the Zacks Rank, and shares have jumped roughly 106% since mid-March.

Disclosure: I own IIPR in the Income Investor trading portfolio.

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