Haywood Capital Markets analyst Neal Gilmer reiterated a “Buy” rating and $0.25 target on Decibel Cannabis (Decibel Cannabis Company Stock Quote, Chart, News, Analysts, Financials TSXV:DB) in a May 22 report, pointing to solid Q1 2025 results and continued brand strength in a competitive market. While revenue aligned with expectations, improved margins pushed EBITDA above forecast.
“Decibel has demonstrated the quality of its brands by capturing strong market share relative to the peer group,” Gilmer said. “As Decibel garners more awareness within the investor base, we believe the valuation will reflect this strong position in the market.”
Decibel’s Q1 2025 results were generally in line with expectations, with revenue close to Haywood’s estimate. Higher gross margins pushed EBITDA above forecast. The company also reduced accounts payable by $2.5-million during the quarter and reiterated its 2025 guidance to generate $20-million in free cash flow.
Decibel Cannabis is a Canadian licensed producer known for its premium Qwest and Qwest Reserve brands and its core brand, General Admission. The company operates three facilities across Canada for cultivation, production and manufacturing.
“We have updated our model following the results and conversation with management,” Gilmer said. “We forecast a 35.2% increase in revenues Q/Q in Q2 driven by both international sales as well as improvements domestically. Our revised estimates are slightly more conservative than management’s guidance as we forecast revenue of $120.9M and EBITDA of $23.4M in 2025.
“We are leaving our 2026 estimates relatively unchanged,” he said. “We reiterate our ‘Buy’ recommendation and target price of $0.25 based on a 1.1x 2026 revenue multiple discounted by 15%.”
Gilmer expects the company’s recent acquisition of AgMedica and international expansion to drive revenue to $120.9-million and Adjusted EBITDA to $23.4-million in 2025, rising to $146.5-million and $28.6-million in 2026.
He said the company used 2020 as a turnaround year, completing and licensing two additional facilities.
“As a result, Decibel demonstrated strong growth in 2021 and 2022 and achieved strong growth in 2023. The impressive growth was supported both through expanded cultivation capacity as well as the introduction of new derivative products and entry into international markets. With the Canadian landscape becoming more competitive, the company acquired AgMedica in late 2024 to accelerate its international platform, that we believe will drive growth in 2025 and beyond.”
Disclosure: Nick Waddell owns shares of Decibel Cannabis.
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