Skip to main content

With An Extra $9.3 Million In Cash, Digital Brands Group Is Ideally Positioned To Continue Its Brand Acquisition Shopping Spree ($DBGI)

With An Extra $9.3 Million In Cash, Digital Brands Group Is Ideally Positioned To Continue Its Brand Acquisition Shopping Spree  ($DBGI)

Digital Brands Group, Inc. (NASDAQ: DBGI, $DBGI) stock has had a rough ride of late. Then again, few stocks, especially those in the small-cap arena, have been spared from recent market carnage. And that has led to impressive companies, despite being in hypergrowth mode, getting a much more severe beatdown than deserved. Digital Brands Group is one of them.

In fact, other than weak markets, which also gave pricing leverage to lenders in a recent capital raise, $DBGI is doing the right things at the right time. They have set all-time revenue records, successfully acquired impressive revenue-generating brands, and completed a capital raise providing more than $9.3 million in cash after fees. While that's a trio of reasons to invest, the icing on the investment cake is that the company has provided some very bullish guidance, expecting revenues to reach between $37.5 million - $42.5 million this year. By the way, a stretch forecast was added indicating that post-acquisition of Sundry, revenues could eclipse the $50 million level.

That all begs the question- at roughly $0.25 a share after completing its capital raise at the same level, does $DBGI stock merit inclusion in a diversified growth stock portfolio? In a word- absolutely. And that's not an overzealous presumption. It's a conclusion based on a simple sum total of DBGI's parts that equates to a valuation disconnect between assets and share price that is too big to ignore.

Still, the decline isn't all bad. Investors, whether averaging in or taking a new position, could be getting rock-bottom prices in a company well into its mission to transform from an expected roughly $40 million company this year to potentially an EBIDTA-positive revenue-generating juggernaut by 2023.

Better Positioned Than Ever For Growth

Indeed, the pieces to make that happen are in place. And except for the share price decline, which exposes a compelling value opportunity, DBGI is doing all the right things to create shareholder value. Analysts agree, with one at Goldman Small Cap Research modeling for shares (pre-capital raise) to reach the $7 mark – more than 25X their current value.

And his calculations make perfect sense, accounting for a surge in expected revenues, applying a conservative peer multiple, the pace of growth, and the value provided by its planned acquisition of Sundry. Obviously, the more than 37.3 million shares added to the DBGI count effects the target on a per-share basis. However, the bullish proposition doesn't change, and a potentially massive increase in the PPS is still in play.

In fact, with a beefed-up balance sheet, the already bullish forecasts could get even better. Remember, DBGI has made no secrets of its intent to grow through accretive EBIDTA-positive acquisitions. Thus, once they close their definitive deal for Sundry, they will have more than just additional revenue-generating firepower; they will have the leverage to make other value-creating deals. 

Moreover, that additional balance sheet strength could be a means for DBGI to take advantage of opportunities priced lower today compared to only two months ago. In other words, weak markets took many other excellent stocks lower, and those unable to raise capital could find themselves in need of a partner or be attractive to a suitor. If that's the case, and it likely is based on industry headlines, DBGI looks ideally positioned to capitalize on near-term opportunities. And if share price is a concern, know this- fundamentals should help correct that gap. Until then, shares appear quite a bargain.

Don't forget the fact that acquisitions could supercharge a company already setting performance records. Moreover, its record-setting revenues are helped by a digitally-focused sales model that keeps margins higher than typical industry levels. Thus, despite inflation, which can affect the pace at which revenues fall to the bottom line, it's good to know that the benefits from DBGI controlling processes from cloth to market to cash register is an advantage that strengthens not only its dollars earned but also the investment proposition.

That means the revenues from DBGI's announced ramp in sales at Bailey 44, DSTLD, Harper & Jones, Stateside, and those expected from Sundry are more powerful to getting DBGI closer to, or reaching, EBIDTA sooner than later.

Optimistic Expectations Expose Valuation Gap

It's not a stretch to say that if markets hadn't been taking it on the chin for the past three months, DBGI shares would likely be appreciably higher. Why? Because its most recent quarterly report showed that its revenue-generating momentum is strengthening. Numbers were so good that shares were reacting like they should have, trending higher with its 52-week high in its crosshairs. That target was justified. And while after accounting for recent dilution, that $8.80 target might not be the first reached using a revenue/share multiple, the O/S count still supports a move toward the $3.00 level, effectively putting a more than 1100% into play.

Of course, DBGI needs to do its part. And it appears as though they are. Despite unprecedented market conditions last year, DBGI's sales in 2021 were 44% higher than in 2020 and, more importantly from an investor's perspective, came with a significant tailwind. Not only that, that tailwind is blowing behind some very bullish guidance, with, as noted, a stretch revenue target of $52 million in the sights following the company's planned acquisition of Sundry. That deal, by the way, is said to be imminent, and trading ahead of the actual closing may be a wise and timely consideration. With history a guide, DBGI shares have a way of surging on positive news. And in this case history may indeed repeat.

Actually, it should. Once closed, DBGI will be in its best position ever to drive shareholder value higher and faster than ever before. Even with roughly 55 million shares O/S if the over-allotment options are exercised, it's still a relatively small float compared to sector peers. Hence, when DBGI prices earn back their more appropriate value, its treasury provides significant purchasing power for additional revenue-generating assets.

Exponential Growth Expected In 2022

And more acquisitions could happen faster than many think. It's a well-defined part of their strategy, and those following DBGI know that they follow through on that intent. Thus, knowing that shares are priced for appreciation makes them attractive from investor's point of view and as currency once fundamentals fill the valuation gap. Here's something else to consider. A bullish move is often triggered after a capital raise is completed and the stock trades above the offering level. That may be what's happening now, evidenced by DBGI decoupling from weak broader markets to close higher every day this week.

Here's better news for those watching and considering DBGI. Business is expected to get better, much better. Looking to 2023, projections accounting for full-year contributions from all brand assets, including Sundry, position DBGI to score revenues upward of $78 million, deliver EBITDA profit as early as 4Q22 and stay positive in all of 2023.

Thus, investing fashion-forward and owning this apparel sector growth company may be an investment style to consider. After all, with DBGI committed to growing, its largest ever acquisition about to close, and plenty of cash on hand to do much more in 2022, it would certainly wear well in a growth stock portfolio.


Disclaimers: Level3Trading is responsible for the production and distribution of this content. Level3Trading is not operated by a licensed broker, a dealer, or a registered investment adviser. It should be expressly understood that under no circumstances does any information published herein represent a recommendation to buy or sell a security. Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The information made available by Level3Trading is not intended to be, nor does it constitute, investment advice or recommendations. The contributors may buy and sell securities before and after any particular article, report and publication. In no event shall Level3Trading be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or made available by Level3Trading, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information in this video, article, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. Level3Trading strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D. For some content, Level3Trading, its authors, contributors, or its agents, may be compensated for preparing research, video graphics, and editorial content. As part of that content, readers, subscribers, and website viewers, are expected to read the full disclaimers and financial disclosures statement that can be found Contributors to are compensated by Trending Equities to produce content for the website. Contributors have no direct financial relationship with any companies featured . Contributors reserve the right, but are not obligated to, submit articles for fact-checking prior to publication. Contributors are under no obligation to accept revisions when not factually supported. Furthermore, because contributors are compensated, readers and viewers of this content should always assume that content provided shows only the positive side of companies, and rarely, if ever, highlights the risks associated with investment. Thus, readers and viewers should accept the content as an advertorial that highlights only the best features of a company. Never take opinion, articles presented, or content provided as a sole reason to invest in any featured company. Investors must always perform their own due diligence prior to investing in any publicly traded company and understand the risks involved, including losing their entire investment.

The Private Securities Litigation Reform Act of 1995 provides investors a safe harbor in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements indicating certain actions & quote; may, could, or might occur. Understand there is no guarantee past performance will be indicative of future results.Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investors investment may be lost or impaired due to the speculative nature of the companies profiled.

Media Contact
Company Name:
Contact Person: K. Kellis
Country: United States

Data & News supplied by
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.