After a strong start to January, driven largely by strong first-quarter fiscal 2020 earnings, is Organigram stock shaping up to be the biggest pot stock success of 2020?
The first full year of cannabis legalization in Canada was a rough one for producers and investors alike. Despite entering the year in a crest of optimism, things quickly went south as scandals, supply, and a lack of retail visibility, among other factors, stunted any tangible growth for pot stocks across the board. As one of the biggest players in the industry, Organigram Holdings (TSX:OGI) (NASDAQ:OGI) was highly exposed to the failings of the market and also had to contend with its own issues, leading to a 75% decline in Organigram stock last year.
Organigram Stock Boosted By Strong Earnings and Cannabis 2.0
However, optimism returned to the cannabis market in early December as companies geared up to roll out their cannabis 2.0 product lines. Organigram Holdings has prepared itself for the 2.0 market with the purchase of a high speed, high capacity chocolate production line, first sales from which are expected in Q1 2020. The company also received approval from Health Canada for 16 additional cultivation rooms at its flagship Moncton facility, bringing total capacity to nearly 90,000 kilograms. Organigram stock is currently trading for $3.45.
While a broad range of high margin cannabis derivative products is likely to provide a major revenue boost for Organigram later in the year, the company's most recent earnings report certainly gave investors more than enough reason to cheer. For the three months ended November 30, Organigram Holdings saw revenue grow by 102% to C$25.2 million, beating consensus estimates of C$21 million. The company also ended the quarter with C$34.1 million in cash to ensure it's well-capitalized going forward. Organigram stock has surged over 30% since those earnings.
Ontario Retail Expansion
The expansion of the Ontario and Quebec retail network looks set to be the biggest boost for Organigram stock in 2020. The Ontario government announced in December that it plans to begin accepting applications for new stores in January, with authorizations to be issued at a rate of 20 per month from April. Organigram has held off on completing the final phase at its Moncton plant until more stores are opened, but its production capacity will expand to 113,000 kilograms once that it is achieved.
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