Please ensure Javascript is enabled for purposes of website accessibility

Why OrganiGram Holdings Stock Dropped Today

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.