Organigram Stock Rallies 35% on Robust Sales Growth Boost

OrganiGram stock

Organigram stock is on the cusp of breaking out after Organigram Holdings (TSX:OGI) (NASDAQ:OGI) reported impressive first-quarter financial results. Organigram stock rallied by more than 25% in early trading on Wednesday, as investors reacted to the stellar financial results that affirm growth in the core business.

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Amidst a string of industry challenges, the Canadian weed company saw its Q1 net revenue grow by 102% to C$25.2 million, beating consensus estimates of C$21 million. Adult use and medical sales accounted for C$16.7 million of the total sales. The remaining C$9.5 million came from wholesale and international markets.

Robust revenue growth could not prevent the weed company from plunging to a net loss of $0.9 million or $0.006 a share compared to a net income of $29.5 million reported a year earlier. Organigram Holdings attributes the wider than expected net loss to non-cash fair value changes to biological assets as well as inventories sold. The company ended the quarter with $34.1 million in cash and short-term investments, with approximately $84.5 million in current and long-term debt.

During the quarter, the company achieved significant milestones. The key among these was its license approval for 16 grow rooms expected to strengthen cannabis production capacity by about $13,000kg. Likewise, the company’s total licensed production currently stands at about 89,000kg.

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At the time of writing, Organigram stock is up 35% at $2.92.

In addition, Organigram Holdings has constructed an additional 56,000 square feet at its existing facility, which is expected to add significant functionality to its Moncton Campus. The expansion will help support additional harvesting rooms as well as extraction capacity and will add a dedicated derivatives and edibles facility.

2020 Outlook

Going forward, Organigram Holdings is planning to expand its footprint into the Canadian market with additional retail store openings, targeting some of the biggest markets of Ontario and Quebec. The company is also looking to take advantage of edibles and derivatives legalization as it looks to strengthen its revenue base.

The company has also started to develop finished cannabis products across a variety of SKUs. Some of the products the company is working on include vape pens and edibles products, which continue to elicit strong demand in the market.

Organigram stock has jumped almost 55% from its 52-week low of $1.89.

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