OrganiGram Holdings Inc. (TSE:OGI) Analysts Are More Bearish Than They Used To Be

The analysts covering OrganiGram Holdings Inc. (TSE:OGI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Surprisingly the share price has been buoyant, rising 28% to CA$1.84 in the past 7 days. Whether the downgrade will have a negative impact on demand for shares is yet to be seen.

Following the downgrade, the latest consensus from OrganiGram Holdings' 16 analysts is for revenues of CA$114m in 2021, which would reflect a major 38% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 87% to CA$0.083. Yet prior to the latest estimates, the analysts had been forecasting revenues of CA$128m and losses of CA$0.075 per share in 2021. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.

View our latest analysis for OrganiGram Holdings

The consensus price target fell 7.5% to CA$2.82, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic OrganiGram Holdings analyst has a price target of CA$5.35 per share, while the most pessimistic values it at CA$1.75. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely differing views on what kind of performance this business can generate. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that OrganiGram Holdings' revenue growth is expected to slow, with forecast 38% increase next year well below the historical 70% p.a. growth over the last five years. Compare this to the 151 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 33% per year. Factoring in the forecast slowdown in growth, it looks like OrganiGram Holdings is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at OrganiGram Holdings. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple OrganiGram Holdings analysts - going out to 2025, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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