Sign In  |  Register  |  About Santa Clara  |  Contact Us

Santa Clara, CA
September 01, 2020 1:39pm
7-Day Forecast | Traffic
  • Search Hotels in Santa Clara

  • CHECK-IN:
  • CHECK-OUT:
  • ROOMS:

Digital Brands Group Stock Soars After Reporting A 766% Surge In E-Commerce Revenues; Guides Toward Additional Acquisitions (NASDAQ: DBGI)

Digital Brands Group Stock Soars After Reporting A 766% Surge In E-Commerce Revenues; Guides Toward Additional Acquisitions  (NASDAQ: DBGI)

Looking for a massively undervalued stock? Check out Digital Brands Group, Inc. (NASDAQ: DBGI), a digitally focused apparel company proving that being a trendsetter has its advantages.On Monday, DBGI announced a 766% surge in its comparative YoY E-Commerce January and February revenues. Shares rallied on the news, and since Friday are higher by more than 84% to $1.84 from its intraday low last Friday. Keep in mind, too, its comparable gains come during a traditionally lowest quarter in a seasonally affected sector. Thus, while DBGI is accelerating growth today, it's expected to gain more momentum in the next three quarters. (* share price at 2:37pm EST, Yahoo! Finance)

And here's the better news- surging revenues aren't the only thing attractive about DBGI. Its share price is another. In fact, combining revenues, a share count of about 12.9 million, an aggressive and accretive acquisition campaign, and peer multiples of at least 3X revenues make DBGI stock a compelling proposition. All tolled, based on current performance and 2022 guidance, Digital brands Group stock should justifiably be trading above the $5.00 level. And that's at a minimum. DBGI is also projected to be EBIDTA positive as early as this quarter and potentially net income positive by the end of 2022. That makes the company worth far more than its less than 1X multiple.

Moreover, there's no shortage of industry examples to justify a premium for DBGI. Warby Parker (NASDAQ: WRBY) sports a bullish $2.9 billion market cap, and another industry player, Allbirds (NASDAQ: BIRD), scores a $930 million valuation at the close of trading last week. Based on a price/sales perspective and year-end revenue expectations, WRBY holds a roughly 5.3X multiple and BIRD a 3.4X. What does DBGI have despite being much closer to becoming a profitable company and with revenue-generating momentum at its back, not its face? At closing last Friday, and based on the midpoint of its guidance, a price/sales multiple of less than 1X. While it's a valuation insult on several levels, the disconnect still exposes one big thing- a potentially massive opportunity.

Acquisitions Big Part Of 2022 Plan

In actuality, it's an opportunity too big to ignore. After all, DBGI isn't slowing its growth pace; they're in hyper-growth mode. After purchasing Stateside in August last year, DBGI is about to close its acquisition of Sundry, a "coastal casual" brand that posted $18.2 million in revenues during the first nine months of 2021, a 37.9% increase over the same period in 2020. More importantly, that transformative acquisition is more than a revenue-generating powerhouse; it also delivers significant bottom-line growth by adding to other EBIDTA positive acquisitions contributing strength to its bottom line. Sundry takes things a step further, having generated a net income of $2.7 during those same first nine months of 2021, an 11.7% increase over the same period in 2020. By the way, expectations are for all portfolio brands to perform appreciably better in 2022.

Not only that, once Sundry is officially added to the books, 2022 revenue estimates jump from a midpoint of $39 million to over $60 million. Better still, DBGI has guided for additional acquisitions to occur during the year. And with DBGI habitually delivering its promises, trust DBGI guidance. Thus, at roughly $1.40 a share, DBGI stock is lower than basement prices; it significantly undervalues an asset portfolio that is surging in value and contribution.

Even better, DBGI has kept dilution to a minimum despite fortifying its revenue-generating arsenal. They have used traditional debt to close deals and have maintained its outstanding share count at roughly 12.9 million. There is one convertible deal out there, but DBGI would still have just shy of 16 million shares in the float even if fully converted into shares. So, any suggestions made that DBGI is sitting on a convertible debt time-bomb are factually incorrect.

Navigating Measured Growth

Also, that impressive capital structure reinforces justification for DBGI stock to trade appreciably higher. Remember, its acquisitions are all EBIDTA positive, meaning they can support the traditional debt terms DBGI made. Even better, by leaving its treasury well-fortified as potential currency, DBGI could potentially eliminate all debt and become a more than $100 million company, assuming another 2022 acquisition, and still having less than 20 million shares outstanding. That could happen if shares reached about $5.00. By the way, its 52-week high is $8.80, and frankly, the company is significantly better positioned for growth today than at that time. Thus, becoming debt-free with an arsenal of performing assets could be closer than many think.

In addition, as its revenues update showed, DBGI has a substantial revenue-generating tailwind at its back. In Q3, DBGI generated about $2.2 million in revenues. Keep in mind, though, its big-ticket acquisitions added only a few months of revenue contributions based on the timing of those closings. But, DBGI is guiding for the bigger picture.

They forecast revenues to reach between $37.5 million and $42.5 million during FY 2022, a more than 350% increase over its 2021 projections. Not only that, DBGI is indicating positive EBITDA for the new year as well, leveraging the power inherent to its shared services platform. Keep this in mind, too. The Sundry acquisition is expected to add at least $20 million to its expected 2022 revenues. In 2023, that number should be higher as DBGI would recognize an entire year of contributions.

Brands Contribute Full Year In 2022

Notably, 2022 will be the first time DBGI reports full-year revenue contributions from Harper & Jones and Stateside, two portfolio assets that add appreciable revenue streams. But that's only two of its revenue-generating assets. Other brands, including Bailey 44 and DSTLD, add considerably more firepower.

In 2021 DBGI reported its Bailey 44 brand saw a 379% surge and DSTLD a 52% jump in revenues, which resulted from an aggressive marketing campaign into the year-end sales season. However, the excellent news there is that DBGI spent only a fraction of its $500,000 budget, about $30,000, to drive those increases. Thus, the dollar-to-dollar returns from the campaigns are more than impressive. They also show that its message reaches the right audience and markets effectively.

From an investor's perspective, perhaps best of all is that revenues are falling faster toward the bottom line. DBGI said its gross profit margin increased 96% year over year to 55.9%. That comes as the company realizes the benefits inherent to its shared services platform that adds efficiencies and cost savings. While the margins are hefty at roughly 56%, DBGI thinks they'll get even stronger. As an end result, and as noted, DBGI may become EBITDA positive in less than 30-days from today.

The DBGI Value Proposition Is In-Play

Better yet, net income may not be far behind, especially with its Bailey 44, DSTLD, Stateside, Harper & Jones, and soon, Sundry brands, firing on all cylinders. And as demand for its styles gains traction, so does DBGI's ability to capture increased "closet share" from clients wanting forward-thinking fashions, inspired styling, responsible manufacturing processes, and comfortable wearability. that's indeed the plan, and DBGI's current brand portfolio covers all the market bases. (Visit its portfolio of brands here)

Likely, that's a big reason why revenues went from doubling quarter over quarter to posting a 766% increase in only the first two months of Q1/2022 on a comparable basis. Of course, those following the developments at DBGI aren't surprised. Excellent products generally result in surging revenues. 

But, what doesn't make sense is for the stock to trade behind the robust growth. Frankly, using just about any valuation metric, DBGI shares are appreciably undervalued. And even more so from a forward-looking perspective, where guidance puts its price-sales multiple at less than 1X revenues. Clearly, there's a disconnect. Still, that's not necessarily bad news for investors taking advantage of the current opportunity.

Too Big To Ignore

In fact, once investors understand that its capital structure is sound and that there is no threat of a toxic conversion, shares could quickly rally back toward 52-week highs. But putting dilution fears to rest is just one reason.

Other justifications for a rally include surging revenues, portfolio appreciation, increasing margins, and an acquisition strategy that could put $100 million in income into the near-term crosshairs. Thus, at current prices, a perfect storm of opportunity exists for investors wanting to seize a valuation gap that is, as noted, too big to ignore.

And if Monday's spike is an indication, investors are doing just that.

 

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 Level3trading.com/disclaimer.

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: Level3Trading.com
Contact Person: K. Kellis
Email: info@level3trading.com
Country: United States
Website: https://www.digitalbrandsgroup.co/


Data & News supplied by www.cloudquote.io
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.
 
 
Copyright © 2010-2020 SantaClara.com & California Media Partners, LLC. All rights reserved.