Decibel Cannabis is heading higher, says Haywood

Impressive-looking quarterly numbers have Haywood Capital Markets analyst Neal Gilmer staying bullish on Canadian cannabis licensed producer Decibel Cannabis (Decibel Cannabis Stock Quote, Charts, News, Analysts, Financials TSXV:DB). In a Monday report to clients, Gilmer maintained a “Buy” rating on the stock, saying investors will soon come around to acknowledging Decibel’s strong position in Canada’s pot market.

Calgary-based Decibel Cannabis released preliminary fourth quarter financials on Monday, featuring net revenue up over 38 per cent sequentially to between $25.25 and $26.25 million. Adjusted EBITDA is expected to come in at between $6.25 and $7.25 million, representing a 47 per cent improvement over Q3 2022’s numbers.

For the upcoming 2023 year, Decibel said it’s targeting year-over-year revenue growth of over 35 per cent.

“We plan to grow our position to become a market leader in Canada through organic growth centred around a pipeline of new, unique, and innovative products and a strong revenue generation engine to grow distribution. Growing our footprint and recognition in Canada will in turn create a foundation to expand our brands internationally, bringing quality and choice to consumers abroad,” the company said in a press release.

Gilmer said the Q4 projections were well above his estimates of $20.6 million for revenue and $4.6 million in EBITDA. 

The analyst said Decibel’s success with its fourth quarter is also clear from the company’s persistent Canadian adult-use market share growth, where DB hit a 6.1 per cent share of the market over the Q4, according to data analytics platform Hifyre, up from 4.7 per cent for the previous quarter.

Gilmer noted that Decibel is ranked fourth among Canadian LPs in total market share in the fourth quarter and held the #3 position for December, accounting for almost 6.7 per cent of total retail sales for the month. He noted that the company was at a 3.8 per cent share a year earlier in Q4 2021 and ranked #8 overall at that time.

“Decibel continues to increase its market share as a result of its diverse portfolio of quality products which is driven by strong performance in both the vape and pre-roll categories in particular,” Gilmer wrote.

With his “Buy” rating, Gilmer maintained a 12-month target price of $0.40 per share, representing at press time a projected return of 142 per cent.

“In our opinion, Decibel has demonstrated the quality of its brands by capturing strong market share relative to the peer group,” he said. “As Decibel garners more awareness within the investor base, we believe the valuation will reflect this strong position in the market.”