OrganiGram Holdings Inc (OGI)

[GMason]

This relates to whole industry: “Monday, with MKM analyst Bill Kirk highlighting an issue that was overshadowed by Friday’s headline numbers: inventory. Since the end of 2017, Canopy has grown 115,000 more kilograms of cannabis than it has sold, he said.

On an annual basis, the entire Canadian legal market is ~180,000kgs (run rate), suggesting Canopy carries >50% of industry wide needs for the year (some may be CBD inventory in U.S.),” Kirk wrote in a note to clients. “Assuming Canopy ceased all growing operations AND maintained current market share, it would take ~2.5 years to sell this product in Canada.

Adding to the gloom, Canopy indicated that its current inventory levels may not have peaked, suggesting it has a lot of product that consumers just don’t want.

We expect large write-downs/destruction/price concessions,” said Kirk. “Canopy doesn’t want to participate in price competition, but to unlock cash from this inventory balance, they may have no choice. Net sales growth is unlikely to accelerate enough to match current production levels, so facility closures are also necessary.”

Seems it comes down to who has the best product will get sales. Ogi better start filling their rooms with top of the line product only because the trailblazer brand isn’t worth crap and most likely will be written off for a loss. Their vape sticks suck too and won’t sell unless they start using better flower to make it.