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Organigram stock moves up as company presents positive pre-legalization fiscal results

OrganiGram Holdings Inc. (OTC: OGRMF) (TSXV: OGI), announced their fourth-quarter and fiscal year operating results on Friday morning, presenting impressive sales increases in the past year. The results end August 31 meaning their reported achievements do not include post-legalization revenue. It implies that investors can expect additional revenue increases in future quarters.

The positive news enthused traders, causing the company’s stock price to increase Friday. OrganiGram stock was among the sparse number of marijuana stock gainers, posting an increase in stock value of 5.52 percent at Friday’s close.

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Like many other marijuana stocks, the company’s value has been on the decline since the legalization of cannabis in mid-October. At its peak in October, the stock was trading at $6.68 in the OTC market but is now down to $3.69. The trade activity closely reflects the overall cannabis market in the last three months which is shown by comparing the stock’s price changes to Horizons Marijuana Life Sciences Index ETF (OTC: HMLSF) in the chart below.

Supply deals inspire revenue growth

The announcement highlighted OrganiGram’s extended reach to buyers with its presence of supply agreements in nine out of 10 provinces in Canada. Quebec is the only province they have not yet reached, but according to the announcement, it remains a target for 2019.

To fulfill product requests in all of these regions, OrganiGram has been continuing development on their Moncton Campus, their primary production facility in New Brunswick. They obtained a $10 million loan from Farm Credit Canada December 7 to help finance this expansion.

Greg Engel, the Company's Chief Executive Officer, commented on the facility during the earnings announcement stating, “Ultimately, it is our view that our Moncton Campus will be seen as a crown jewel in the industry as it is able to produce consistent, high-quality indoor grown product at scale to support our brands with the lowest dried flower cultivation costs reported to date in Canada."

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The company also had their first international shipments of medical marijuana when they shipped dried flower and cannabis oil to Australia. According to an analysis by Health Canada, “overseas exports will be a growing complement of aggregate sales for marijuana stocks as time passes,” so continued expansion into international territory will be crucial for OrganiGram’s growth.

Looking towards 2019

CEO Engel commented on the company’s preparation for recreational marijuana sales, stating: “We are incredibly proud of our ability to meet the challenges of scaling our business in preparation for the adult recreational use market. We are pleased with our progress to date and believe that we have performed well in a highly competitive space while always maintaining a sustainable cost structure. “

Additionally, the company is looking forward to future recreational marijuana sales now that it is legal in Canada. According to the announcement, the company believes fiscal year 2019 sales will be “dominated by adult recreational use revenue and the Company estimates that Q1, 2019 sales will exceed that of the full year for fiscal 2018.”

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The company believes that their $19.9 million in biological assets and $45.0 million in inventories reported will be able to support their ability to service a growing medical and recreational marijuana customer base. In a time when product shortages are plaguing the marijuana industry, this will be a powerful advantage for Organigram if they can keep up with consumer demand while other industry players fall behind.

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