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Cannabis Stocks Dive as Aphria’s (APHA) Earnings Disappoint; OrganiGram (OGRMF) Remains a Buy, Says Jefferies


Today’s selloff by shares of Aphria (APHA) is a bitter pill for everyone.

Cannabis stock investors across the board fled for the exits after the Canadian cannabis producer announced disappointing fiscal first-quarter results before the market opened.

If you own shares of marijuana grower OrganiGram (OGRMF) (TSE:OGI), we have good news and bad news for you. The bad news: The stock is down nearly 6% is reaction to Aphria’s bad earnings news.

The good news: OrganiGram delivered an earnings beat today, with net revenues of C$26.9 million, slightly above the Street estimates of C$25.5 million. Gross margin and Adj EBITDA were also strong at 60% and C$13.3 million, beating expectations of 59% and C$13.3 million respectively.

In reaction, Jefferies analyst Owen Bennett reiterates a Buy rating on the cannabis stock, with a C$10.00 price target. (To watch Bennett’s track record, click here)

Bennett commented, OrganiGram delivered impressive Q2 results – its third consecutive quarter of positive EBITDA. Revenues, GM and EBITDA all exceeded estimates and guidance. In our initiation, we argued that OrganiGram’s recreational outlook deserved more value, and we think this is validated by that fact that its Q2 recreational sales were second only to Canopy’s. Further details on plans for vape and beverages were welcome, setting the company up well for October’s launch.”

The analyst continued, “Q2 marks three consecutive quarters of positive adjusted EBITDA, which we expect to be viewed positively in the context of many peers who are currently loss-making or expected to be loss-making in the short term. OrganiGram’s industry-high margins are impressive when considering that all of its production is indoor rather than in greenhouses, and a control on other operating expenses has allowed for strong EBITDA. Some concerns may be raised around a lack of investment, especially for the launch of cannabis derivatives (extracts) later this year, but plans look to be firmly in place for this.”

All in all, most analysts on Wall Streets are out rooting for this cannabis maker to be a winning stock pick, as TipRanks analytics showcase OrganiGram as a Strong Buy. Based on 11 analysts polled in the last 8 months, all 11 are bullish on the stock. The 12-month average price target stands at C$9.57, marking a nearly 10% upside from where the stock is currently trading.

To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.