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Say there's a difference between Canadian marijuana stocks Tilray Inc. (NASDAQ: TLRY) and Organigram Holdings Inc. (NASDAQOTH: OGRMF) says it softly. The difference really appears when you look at recent performance. The chart jumped more than 50% last month. This gain, however, seems derisory if it is considered that Tilray climbed by nearly 350% during the same period.
But which of these marijuana stocks is the best choice for investors? The arguments for Tilray and Organigram are not as different as you might think.
Source of the image: Getty Images.
The case for Tilray
Why has Tilray's stock price so increased in recent weeks? I suspect a big factor is that stock trading on the Nasdaqwhich makes it more visible and accessible to US investors. Another potential reason behind the big movement of action is that many people think that Tilray could be a big candidate for big liquor manufacturers. Diageo choose as a cannabis partner. I think the most important case for the purchase of Tilray, however, is Why this could be considered by Diageo.
A likely factor is Tilray's production capacity. The company is expected to have an area of 912,000 square feet by the end of the year, including 230,000 square feet in Tilray facilities in Portugal. As many of them predict tremendous demand in Canada once the recreational marijuana market is open next month, capacity will be essential.
Speaking of the Canadian market for recreational marijuana, Tilray has been very successful in aligning supply agreements with the provinces and territories. To date, the company has entered into agreements with British Columbia, Manitoba, Nova Scotia, Ontario, Quebec, the Yukon and the Northwest Territories.
But the global opportunity is the biggest prize to win before Tilray. The company is already exporting medical cannabis to 11 countries outside of Canada, including Germany, the largest cannabis market outside of North America. Tilray's international sales represent only about 5% of total business revenue in the second quarter, but this percentage is expected to increase significantly over time.
Tilray is also in a good financial position to continue to develop its capabilities and international operations. The company announced $ 25.3 million at the end of June. However, this figure does not include the net proceeds of $ 163.6 million from its IPO.
The case for Organigram
Organigram shares are not available for trading on a US stock exchange. And the company has not received as much noise as Tilray and a few others as a prospect for Diageo or other liquor companies. This does not mean that Organigram is not in the study, though.
The company also significantly increases its production capacity. Although Organigram can currently produce 36,000 kilograms per year, its capacity will increase to 62,000 kilograms over the next eight months. In the fourth quarter of 2019, Organigram plans to increase its annual production capacity to 113,000 kilograms.
Organigram is not too far behind Tilray in aligning supply agreements with the provinces and territories for the recreational cannabis market. It has already signed agreements with Alberta, Manitoba, New Brunswick, Nova Scotia, Ontario and Prince Edward Island. Organigram also hopes to win a supply agreement in the not-too-distant future with Newfoundland.
Like Tilray, Organigram has eyes on marijuana markets outside of Canada. In May, the company entered into a partnership with Alpha-Cannabis Germany, including the acquisition by Organigram of 25% of the German medical cannabis distributor. Organigram has also teamed up with Cannatrek Medical to provide medical marijuana in Australia.
Flowchart appears to be in great shape to fund additional expansion efforts. As at May 31, 2018, the Company had cash and short-term investments of C $ 156 million.
Best marijuana stock
Tilray is certainly the hottest marijuana stock compared to Organigram. But is it the best marijuana stock? I do not think so.
My point of view is that Tilray has simply become too expensive. Flowchart is virtually a stock of value when you look at it side by side with Tilray. The biggest blow against Organigram, in my opinion, is that it's not as established in international markets as Tilray. In the long run, I'm afraid that Organigram will get stuck by bigger competitors. But given the choice between Tilray and Organigram now, I would go with Organigram.
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