There are plenty of reasons to invest in OrganiGram Holdings Inc. (NYSE:OGI). There are three recent catalysts that could boost OGI stock.
First, not only is OGI technically oversold, a subsidiary of British American Tobacco (NYSE:BTI) just invested $176 million in the company. Second, more states have legalized the use of cannabis, and far more Americans now approve of its use.
In addition, after generally pulling back over the course of 2020, the OGI stock appears to have caught strong support. Currently, the price is hovering around $4.25. Eventually, I would like to see OGI stock revisit 2019 highs of around $8 with key catalysts.
Catalyst No. 1 – British American Tobacco Just Invested $176 Million
Better, according to a press release from OrganiGram, the deal will help strengthen its research and development, and help it to raise capital for investment in U.S. and international markets. You can bet this won’t be the last of big investments in cannabis companies.
After all, according to Tristan Gervais, Chrystal Capital’s Head of Cannabis advisory at Europe’s Cannabis Merchant Bank, as quoted by CNBC, “As global cannabis deregulation gains pace, led by the US, we have been approached by an increasing number of Big Tobacco, Big Pharma and leading FMCG companies, looking to invest in the Cannabis sector.”
Catalyst No. 2 – Legalization Efforts are Under Way
At the moment, 15 states and Washington, D.C. have legalized the use of cannabis.
About 36 states permit its use for medical reasons. Even more states are likely to jump on the bandwagon. Better, we could soon see efforts to legalize it at the federal level. Senate Majority Leader Chuck Schumer could help end the current prohibition of cannabis this year.
All as more Americans approve of legalization. In fact, according to a 2020 Gallup poll, support for legalization is now up to 68%:
“Americans are more likely now than at any point in the past five decades to support the legalization of marijuana in the U.S. The 68% of U.S. adults who currently back the measure is not statistically different from last year’s 66%; however, it is nominally Gallup’s highest reading, exceeding the 64% to 66% range seen from 2017 to 2019.”
Catalyst No. 3—Cannabis Could See Higher Highs with Mexico
Mexico may have just given the sector a sizable boost after approving a bill that could legalize recreational cannabis.
“If enacted, Mexico would join Canada and Uruguay in a small but growing list of countries that have legalized marijuana in the Americas, adding further momentum to the legalization movement in the region,” says The New York Times’ contributor Oscar Lopez.
The Bottom Line on OrganiGram Holdings Stock
While OrganiGram Holdings’ earnings haven’t been anything to write home about yet, explosive sector growth could fuel immediate-term upside.
In its latest quarter, net revenue came in at $19.3 million, as compared to $25.2 million year over year. That was thanks to lower wholesale revenue, and a lower average sales price. Gross revenues came in at $25.3 million from $28.4 million year over year, as its cost of sales increased from $15.8 million to $23.2 million.
With legalization efforts well under way at the state and hopefully federal level, coupled with higher approval ratings, we could see massive growth in cannabis stocks. It helps that big companies like British American Tobacco have begun to invest in the sector.
With growth likely, I’d take a position in OGI for the long-term. At the moment, it’s oversold, and could double, if not triple with patience. After all, the cannabis boom isn’t showing any signs of slowing down, at least not any time soon.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.