Canadian cannabis LP Organigram (Organigram Stock Quote, Chart, News, Analysts, Financials TSX:OGI) dropped sharply in trading as the market reacted to its latest earnings report. But the bottom has been reached, according to Rahul Sarugaser, analyst for Raymond James, who in a quarterly review on Tuesday raised his rating from \u201cMarket Perform 3\u201d to \u201cOutperform 2.\u201d Moncton, New Brunswick\u2019s Organigram released its fiscal first quarter 2021 financials (ended November 30) on Tuesday, showing net revenue of $19.3 million, a 23-per-cent year-over-year drop. Adjusted EBITDA was a loss of $6.4 million compared to a gain of $5.7 million a year earlier. Organigram\u2019s share price had been on a long decline since mid-2019 but popped last week from $1.80 to $2.20 last week. The stock lost half of those gains on Tuesday, closing at $2.10. On OGI\u2019s progress in the still-early days of Canada\u2019s cannabis trade, CEO Greg Engel pointed to double-digit sales growth in the rec market over the fiscal Q1, whereadult-use gross and net revenue grew by 42 per cent and 30 per cent, respectively, on a year-over-year basis and by 14 per cent and 11 per cent, respectively, on a sequential basis. Engel said it shows the success of Organigram\u2019s new product launches. \u201cNow we look forward to our new higher margin Edison dried flower offerings contributing substantially to overall revenue with even more new products to come in the next few quarters,\u201d Engel wrote in a press release. \u201cWe believe our product portfolio revitalization combined with additional resources to ramp up production and achieve greater economies of scale as well as our relentless focus on increased automation and cost efficiency opportunities position us well to generate further top-line growth and significantly improve gross margins.\u201d In his review, Sarugaser noted that OGI\u2019s share of the Canadian adult-use cannabis market has been drifting downward over the last several years, from about 8.5 per cent on average in fiscal 2019 to 5.6 per cent in fiscal 2020 to about 4.2 per cent for this fiscal Q1 2021. But the decline this quarter was less than expected, according to Sarugaser, who had estimated OGI\u2019s market share for the Q1 at 3.4 per cent. The company\u2019s adult-use sales at $16.8 million were better than the analyst\u2019s forecast of $13.5 million. Sarugaser said the $16.8 million represented a material bump from the $15-million plateau Organigram had settled into over the last three quarters. \u201cWe read this uptick in demand for OGI-branded products as a positive: an early success yielded from its long-running SKU revitalization exercise and a testament to the company\u2019s growing brand equity in Canada. (Wholesale sales can be a nice kicker\u2014largely absent this quarter\u2014but adult-use product sales gives us a truer view of consumer demand for OGI's products and brands),\u201d Sarugaser wrote. \u201cAnd, crucially, OGI revealed that it had left opportunity on the table this quarter; OGI was unable to fulfill $4-5 million of provincial purchase orders due to capacity and staffing constraints during 1Q21 alone. While we view stock-outs like this as a near-term negative, we believe these are relatively simple problems for OGI to solve in order to drive its market share higher: increase capacity (currently operating at 40 per cent), staff up (planning to hire ~100 employees by 3Q21, 30 focused solely on fulfillment). No more stock-outs. Much-reduced unabsorbed overhead,\u201d Sarugaser said. Overall, Organigram\u2019s Q1 revenue of $19.3 million was a beat of Sarugaser\u2019s $17.8-million estimate (consensus was $20.2 million) while the adjusted EBITDA loss of $6.4 million was significantly below Sarugaser\u2019s call for negative $0.9 million (consensus was negative $1.8 million). Sarugaser said investors should take note of OGI\u2019s appointment of Marni Wieshofer to its board, representing the company\u2019s first US-domiciled director whose primary expertise in international M&A and brand-building. Sarugaser said selecting Wieshofer \u201cindicates to us that OGI\u2019s attitudes toward the future of its business are becoming increasingly ambitious and outward-looking\u201d and \u201cis the first significant, public indication OGI has made to suggest that the US cannabis sector is squarely in its crosshairs.\u201d That\u2019s encouraging, says Sarugaser, given that recent shifts in the US Congress composition may be more supportive of cannabis reform. \u201cWe believe demand for OGI\u2019s well-curated suite of products is strengthening, and we believe OGI\u2019s market share bottom is in. For these reasons alone, we see today\u2019s stock weakness as an excellent opportunity to build positions,\u201d Sarugaser wrote. With his new \u201cOutperform\u201d rating, Sarugaser has maintained his $3.00 target price, which at press time represented a projected 12-month return of 31.6 per cent. Sarugaser has updated his estimates and is now calling for fiscal 2021 (year end August 31) revenue of $95 million (previously $81 million) and EBITDA of negative $23 million (previously positive $2 million). For fiscal 2022, he is expecting revenue of $132 million (previously $108 million) and EBITDA of $7 million (previously $15 million).