Decibel Cannabis. Buy, Sell or Hold?

Haywood Capital Markets analyst Neal Gilmer says the temporary halt of Canadian cannabis imports into Germany is creating near-term pressure for Decibel Cannabis (Decibel Cannabis Stock Quote, Chart, News, Analysts, Financials TSXV:DB), but does not change his positive long-term outlook for the producer’s international growth strategy.

In a research report dated Nov. 19, Gilmer reiterated his “Buy” rating and $0.25 target price, noting that Decibel delivered solid third-quarter results with strong year-over-year growth from the AgMedica acquisition, resilient margins, and free-cash-flow generation that continues to strengthen the balance sheet.

Decibel reported Q3 revenue of $32.9-million, up 36.5% from last year and broadly in line with Gilmer’s $33.7-million estimate. Adjusted gross margin of 48.7% exceeded his 47.5% forecast, and Adjusted EBITDA came in at $7.3-million, a 22.1% margin and well ahead of his $6.1-million estimate. EBITDA rose 41.2% year over year. The company generated $1.8-million in operating cash flow, $1.5-million in free cash flow and $5.2-million in adjusted free cash flow, ending the period with $6.1-million in cash and $36.3-million in debt, most of which is not due until 2027.

Gilmer said Decibel’s international segment performed as expected and remains a key driver of long-term value. The business contributed $8.4-million in quarterly revenue, supported by $7.8-million from the AgMedica assets. Canadian recreational revenue also increased 3% year over year.

He said the recent disruption in German imports, along with the B.C. General Employees Union strike and contract-structuring timing, prompted management to revise fiscal 2025 guidance to approximately $115-million in net revenue and $24-million in Adjusted EBITDA, down from previous expectations of $130-million and $25-million.

“The impact from the German import halt will have a near-term impact as reflected in the revised guidance,” Gilmer said. “However, we remain bullish in the view for growth in the German market and return to normalized product flow towards the end of the year.”

Gilmer said these disruptions are temporary and do not alter Decibel’s competitive position, citing the company’s strong premium-brand portfolio, Qwest, Qwest Reserve and General Admission, and its three cultivation and manufacturing facilities across Canada. He noted that Decibel’s expanding international footprint now includes exports to seven countries, and that the AgMedica acquisition accelerated the company’s global platform at a time when Canadian domestic competition continues to intensify.

Following Q3 results, Gilmer lowered his Q4/25 forecast to align with revised guidance and made a modest downward adjustment to his 2026 estimates to reflect a lower starting base. His $0.25 target is based on a 1.4-times multiple of 2026 revenue, discounted by 15%. He said he continues to recommend accumulating shares at current levels.

“In our opinion, Decibel has demonstrated the quality of its brands by capturing market share relative to the peer group,” he said. “The company’s push into the international segment over the past year has driven revenue growth and is expected to continue next year.”

Gilmer expects Decibel to generate Adjusted EBITDA of $23.8-million on $115.2-million of revenue in fiscal 2025, increasing to $29.3-million on $140.1-million of revenue in fiscal 2026.

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