OrganiGram Holdings Inc. (OGI) shares soared 25% in after-hours trading on Tuesday afternoon after the company reported better-than-expected first quarter financial results. Revenue rose 102.2% to $25.15 million, beating consensus estimates by $10.24 million, while the company broke even on an earnings per share (EPS) basis, beating consensus estimates that projected a loss for the quarter of two cents per share.
Despite ongoing industry challenges, the company began shipping its Trailblazer Torch vape cartridges on schedule and expects to begin shipping Edison + Feather ready-to-go distillate pens before the end of the month. The company received its license for chocolate production and packaging in December and is on track to begin selling cannabis-infused chocolate products during the first quarter of the calendar year.
Prior to the earnings announcement, Bank of America initiated coverage on OrganiGram stock with an Underperform rating and a C$2.50 price target. Analyst Chris Carey believes that there are a number of positives for OrganiGram, but his preference is for companies with robust balance sheets and some "control over their near-term destiny." He added that the rating is not a call on the fiscal Q1 financial results, but rather, for the company's 2020 setup.
From a technical standpoint, the stock could break out from its extended downturn following the positive results. The relative strength index (RSI) remains in neutral territory with a reading of 42.11, while the moving average convergence divergence (MACD) could see a bullish crossover toward the zero-line. These indicators suggest that the stock has room to run if the rally extends into the regular session on Wednesday.
Traders should watch for a breakout from trendline resistance and the 50-day moving average at around $2.59. If the stock fails to break out, traders could see a move lower to retest lows of around $2.00. If the stock does break out, traders should watch for a retest of prior reaction highs at around $3.75. The company has returned to a positive adjusted EBITDA, but the industry is still in the midst of a downturn.
The author holds no position in the stock(s) mentioned except through passively managed index funds.