We came across a bullish thesis on Organigram Holdings Inc. (OGI) on Substack by Jake LaMotta. In this article, we will summarize the bulls’ thesis on OGI. Organigram Holdings Inc. (OGI)’s share was trading at $1.27 as of Feb 14th. OGI’s forward P/E was 28.99 according to Yahoo Finance.
A close-up of a package of cannabis accessories, displayed on a brightly-lit retail shelf.
Organigram (OGI) has become one of the most compelling investment opportunities following a sharp sell-off in its shares after the release of its Q1 results, which caused the stock to drop about 25%, hitting a 52-week low. Despite this market reaction, the company’s core fundamentals remain solid, and in fact, they are strengthening. OGI’s position within the Canadian cannabis market is strong, with dominant market share across several product categories, including pre-rolls and vapes, the fastest-growing segments in the industry. Given the company’s microcap status, with a fully diluted market cap of approximately $215 million USD and a free float under $100 million, market inefficiencies are to be expected, providing a unique opportunity for investors willing to look beyond prevailing market sentiment. Institutional investors have largely stayed on the sidelines due to regulatory and structural barriers, which, combined with the broader cannabis sector’s struggles, have dampened sentiment. This dynamic presents an opportunity for those with a long-term perspective.
As Canada’s largest cannabis producer, OGI holds a top-three position in all major product categories. It also stands out for its strong presence in the pre-roll and vape categories, thanks to the recent acquisition of Motif Labs, which enhances its position in the vape market, particularly through its BOXHOT brand. This acquisition, along with OGI’s SHRED brand, gives the company a combined 7% market share in the vape category. OGI has also focused heavily on innovative product development, particularly in edibles. The introduction of Edison Sonics FAST gummies, which leverage nanoemulsion technology to create more potent edibles while adhering to Canada’s strict THC limits, positions the company to tap into the growing consumer demand for stronger edibles. This product innovation is expected to disrupt the market and further solidify OGI’s competitive position.
In terms of financial health, OGI is in a strong position. Following its partnership with British American Tobacco (BAT), the company has bolstered its balance sheet with CAD 113 million in cash and no debt, meaning that its net cash represents approximately 40% of its market cap. This solid financial footing provides a significant margin of safety for investors. Additionally, OGI’s book value stands at around CAD 365 million, which offers further security. The company’s forward cash burn has been significantly reduced, putting it in a better position compared to other cannabis companies that are burdened with excessive debt. Despite a series of positive developments—such as the BAT investment, strong fiscal year performance, and the Motif acquisition—OGI’s stock price has only increased by 14% since these events, indicating a disconnect between the company’s improving fundamentals and its market valuation.
OGI is projected to generate over $275 million in net sales, which results in an EV/net sales ratio of approximately 0.7, suggesting that the company is undervalued relative to its market-leading position and growth prospects. With synergies from the Motif acquisition, OGI’s EBITDA is expected to rise significantly, reaching an estimated $23 million, with more conservative estimates predicting up to $30 million by 2026. Applying a 15x multiple to this EBITDA and adding back cash, OGI’s target share price rises to $3.50. This target price could be conservative, considering the growing cannabis market and OGI’s untapped international potential. Additionally, the ongoing rationalization of the cannabis sector could lead to rising prices, further boosting OGI’s growth.
The risks to OGI’s outlook are minimal, as the company is unlikely to face significant challenges in capital allocation, and Motif’s performance should improve as synergies are realized. With no debt and minimal cash burn, OGI is well-positioned to navigate industry challenges. The stock’s current price presents an attractive entry point for investors, particularly given the company’s potential for near-term profitability as it capitalizes on market trends and operational improvements.
Organigram Holdings Inc. (OGI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 5 hedge fund portfolios held OGI at the end of the third quarter which was 3 in the previous quarter. While we acknowledge the risk and potential of OGI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than OGI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.