152 per cent upside and outperform rating With the update and retained “Outperform” rating, Frderico Gomes at ATB Capital has also stuck with a one-year target price of $3.50 per share, which at press time represented a projected return of 152 per cent. OGI’s topline was a beat of analysts’ expectations, with the $38.1 million in revenue coming in ahead of the consensus call of $33.8 million as well as ATB’s forecast at $32.6 million. On EBITDA, OGI’s $0.6 million was under both the Street’s estimate at $2.1 million and ATB’s $1.0 million. Gomes estimated Organigram’s free cash flow for the quarter at negative $23.6 million, broken down to $6.4 million used in operations and $17.1 million in capex.
Gomes said the highlight of the quarter was OGI’s 38.7 per cent sequential increase in recreational sales. The analyst said that number validates his thesis that OGI is one of the best operators in the space and is well-positioned to continue gaining market share.
“Over the last twelve months, OGI gained +111 basis points in market share; the Company is the #3 LP in Canada, and may become the #1 LP over the next few quarters if it maintains the same positive market share trend,” Gomes wrote.
“Considering OGI’s robust capital position, consistent execution, and positive sales momentum, we maintain our constructive stance on the stock,” he said.
On his projections, Gomes raised his rec pot net revenue estimates in response to the quarterly numbers while lowering his near-term EBITDA estimates on a more conservative view on adjusted gross margins due to what he called a persistently challenging pricing environment. Gomes is calling for Organigram to deliver full fiscal 2022 revenue and adjusted EBITDA of $143.3 million and $1.0 million, respectively, and fiscal 2023 revenue and EBITDA of $220.1 million and $21.2 million, respectively.
Gomes concluded his report by saying OGI should continue delivering positive sales and earnings momentum as it has three key tailwinds at its back: (1) scale benefits from cultivation expansion in Moncton from 55,000 kg/year to 80,000 kg/year in dried flower; (2) margin expansion from product innovation and expanded distribution of recently-acquired Quebec cannabis company Laurentian’s premium portfolio; and (3) investments the company has made in automation and cultivation improvement.
LINK : https://www.cantechletter.com/2022/07/organigram-has-a-152-per-cent-upside-says-atb-capital/