Organigram gets new $10.00 price target at Echelon Wealth

Two minute read on Organigram Stock

After an event filled period for Organigram (Organigram Stock Quote, Chart TSXV:OGI), Echelon Wealth Partners analyst Russell Stanley has raised his one-year price target on the stock.

In a research update to clients Tuesday, Stanley maintained his “Speculative Buy” rating on Organigram, but raised his one-year price target on the stock from $7.00 to $10.00, implying a return of 31 per cent at the time of publication.

The analyst says recent progress on sales agreements, such as the ones made in Nova Scotia and Newfoundland, and strategic investments, such as its deal with Eviana Health and Hyasynth Biologicals, position Organigram, well. He explained the reasoning behind his price target bump.

Why the analyst raised his price target on Organigram stock

“We have introduced estimates for F2021 and have rolled forward our valuation basis to C2020 (given OGI’s August FYE, our C2020 estimates are based on appropriately weighted averages of our F2020 and F2021 forecast),” the analyst said. “We now value OGI using a 16.5x EV/C2020E EBITDA multiple, which represents a conservative 9% discount to the broad peer group average of 18.1x, and a 55% discount to the average for companies with a $1B+ market capitalization of 36.8x. We believe OGI’s fundamental strengths justify a premium to the broad peer group (rather than a discount), but we view this small discount as reasonable given the recent spike in multiples across the sector.”

Stanley thinks OGI will generate Adjusted EBITDA of negative $4.2-million on revenue of $15.7-million in fiscal 2018. He expects those numbers will improve to EBITDA of positive $35.9-million on a topline of $109.8-million the following year.

“With large scale production capacity and supply agreements with seven provinces, we believe OGI could be an attractive candidate for potential strategic investors/acquirers,” Stanley adds.