OrganiGram Holdings Inc. (TSE:OGI) Analysts Are Reducing Their Forecasts For This Year

Today is shaping up negative for OrganiGram Holdings Inc. (TSE:OGI) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon.

Following this downgrade, OrganiGram Holdings' 14 analysts are forecasting 2021 revenues to be CA$73m, approximately in line with the last 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 64% to CA$0.41. However, before this estimates update, the consensus had been expecting revenues of CA$91m and CA$0.23 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

Check out our latest analysis for OrganiGram Holdings

The consensus price target fell 6.9% to CA$3.91, implicitly signalling that lower earnings per share are a leading indicator for OrganiGram Holdings' valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic OrganiGram Holdings analyst has a price target of CA$6.15 per share, while the most pessimistic values it at CA$2.50. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that OrganiGram Holdings' revenue growth is expected to slow, with the forecast 0.8% annualised growth rate until the end of 2021 being well below the historical 56% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 30% annually. Factoring in the forecast slowdown in growth, it seems obvious that OrganiGram Holdings is also expected to grow slower than other industry participants.

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. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that OrganiGram Holdings' revenues are expected to grow slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of OrganiGram Holdings.

So things certainly aren't looking great, and you should also know that we've spotted some potential warning signs with OrganiGram Holdings, including major dilution from new stock issuance in the past year. Learn more, and discover the 1 other concern we've identified, for free on our platform here.

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