Most cannabis companies have done well amid the coronavirus pandemic thanks to regular demand for marijuana, which is behaving more and more like a consumer good. U.S. pot companies in particular have soared this year. Curaleaf Holdings (OTC:CURL.F) is one example, having experienced revenue growth and improving profit margins since January. Meanwhile, challenges for Canadian counterparts remain. Last year’s headwinds, which included regulatory delays and a thriving black market, continue to take a toll on the Canadian market. OrganiGram Holdings‘ (NASDAQ:OGI) performance is proof of that.
OrganiGram is smaller than Curaleaf, sporting a market cap of $221 million compared to Curaleaf’s cap of $3.8 billion. Shares of Curaleaf are up 13.8% this year, while Organigram is down a sobering 53.8%. The Horizons Marijuana Life Sciences ETF declined by 28% over the same period. Let’s take a look at which among these two cannabis stocks is the more hopeful investment.
OrganiGram’s third-quarter results were worrisome
OrganiGram produces cannabis for the medical and recreational markets. Despite its reach, the company’s fiscal third quarter results for the period ended May 31 didn’t paint a great picture of the business.
Organigram’s net revenue dipped 27% year over year to 18 million Canadian dollars in the quarter. It blames falling revenue on struggling sales volume of dried cannabis flowers. There were a few other market factors that affected sales, including the lower average net selling price of cannabis products from increased competition and evolving consumer preferences. Consumers preferred to order in bulk during the early stages of the pandemic. However, Organigram’s reduction of workforce and impact on the supply chain amid the pandemic delayed the launch of their value products in larger formats, which are more suitable for stocking up during stay-at-home orders.
OrganiGram’s selling, general, and administrative (SG&A) expenses increased by 13% to CA$10.2 million and the cost of sales rose a stunning 256% to CA$44.3 million from the year-ago quarter. Both of these expenses help explain the quarterly EBITDA loss of CA$24.7 million compared to EBITDA profit of CA$7.7 million in Q3 2019. OrganiGram said its increased SG&A expenses were due to the scaling of its operations, which included marketing and other expenses associated with the initial launch of cannabis derivatives products.
As the pandemic weighed on costs, Organigram was forced to cut 45% of its workforce. According to management, the reduction of the workforce delayed the launch of many of its new cannabis derivatives.
Canada made cannabis derivative products such as…