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Why OrganiGram Holdings Stock Dropped Today

By Howard Smith - Apr 13, 2021 at 10:51AM

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Investors initially reacted negatively to the Canadian cannabis company's quarterly results.

What happened

OrganiGram Holdings (OGI 4.76%) reported its fiscal second-quarter 2021 results this morning, and the stock initially dropped 12% on the report. The decline quickly eased, however, with shares trading about 2% lower than Monday's close as of 10:20 a.m. EDT. 

So what

The results at first glance did not look positive, but investors likely saw the negative metrics as temporary. OrganiGram CEO Greg Engel noted the business was "challenged by industry dynamics, COVID-19 and staffing limitations at our facility." OrganiGram currently operates a single facility in New Brunswick. The company reported net revenue decreased 37% compared to the year-ago period, and cost of sales almost doubled. 

marijuana plants in containers

Image source: Getty Images.

Now what

The marijuana company also highlighted some recent events it believes will significantly help its growth trajectory. Last month, OrganiGram and tobacco giant British American Tobacco (BTI 0.48%) announced a product development collaboration. British American Tobacco will take a 19.9% stake in OrganiGram for an investment equivalent to about $175 million. 

Last week, the company announced it has acquired The Edibles & Infusions Corporation (EIC), a maker of cannabis-infused products including soft-chew edibles. The acquisition gives OrganiGram a second operating facility and a footprint in Western Canada. Soft chews are the fastest growing edible category, and will provide a near-term revenue boost along with a growth platform from the category and new facility. 

Investors will likely not need to wait too long to see if the drop in business is transitory due to the pandemic impacts, as the company suggests. A subsequent quarter of bad news would be more concerning, as the business should react positively to progress with the pandemic recovery.

 

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Stocks Mentioned

OrganiGram Holdings Stock Quote
OrganiGram Holdings
OGI
$1.00 (4.76%) $0.05
British American Tobacco p.l.c. Stock Quote
British American Tobacco p.l.c.
BTI
$41.46 (0.48%) $0.20

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