Digital Brands Group, Inc. (NasdaqGS: DBGI) stock is trading higher by more than 80% since its May IPO*. And investor sentiment appears to be firm to the upside. In fact, buyers stepped up on Monday, exercising rights to purchase an additional 361,445 shares in the company at $4.15 per share. That officially closes the over-allotment portion of the IPO and, when tallied to the original proceeds, provides DBGI with $11.5 million before underwriting expenses to expand operations. (* share price at $7.31 at 9:54 est)
The bullish sentiment continued after an upbeat forecast from CEO Hil Davis during his Q1 update, guiding for increased revenue-generating momentum heading into the back half of this year. In fact, he noted that despite the lingering headwinds from the pandemic-related disruptions, investors can expect revenues from Harper & Jones, Bailey 44, and DSTLD to increase later this year. Better still, he brought to investor's attention that had Harper & Jones revenues been included in its Q1 filing, more than $900,000 would have been added to its quarterly totals. Harper & Jones was acquired as part of the IPO.
The biggest takeaway from the update, which investors are focused on, is that DBGI is an entirely different company post-IPO. In fact, heading into the next two quarters, DBGI is well funded, is set to launch a comprehensive marketing campaign, can benefit from channel expansion into Amazon Marketplace, and is expecting to acquire another revenue-generating asset, Stateside apparel.
Thus, DBGI is doing its part to create shareholder value. In fact, in a little over a month, management increased that value by 80%. Still, there is likely more to come in the near and long term.
Guidance For Strong Q3 and Q4
Indeed, with its strengthened balance sheet, DBGI is accelerating its pace of growth. They announced earlier this month that DSTLD inventories are building to support market demand, and its Bailey 44 products should see a considerable acceleration in wholesale booking orders in the Fall. Also, proceeds from its IPO will help to significantly enhance marketing and advertising initiatives starting in Q3. And with wholesale buyers and consumers returning to the markets with stimulus-fueled spending power, the combination of all positions DBGI to meet management's bullish expectations.
Moreover, if the company closes on its planned Stateside acquisition, even its own bullish estimates could prove conservative.
Closing its $11.5 Million IPO
Better still, the added funding from the exercise of the share over-allotment connected to its IPO positions DBGI to deliver more value sooner rather than later. In fact, it already is. As noted, its Bailey 44 brand has seen an increase in orders that are sending wholesale order levels back to pre-COVID levels. Moreover, DSTLD received a men's denim shipment in May, with additional inventory coming in July to support sales to both men's and women's fashions. And after the inventory build and expenditures made to advance its comprehensive marketing initiatives, DBGI will still have plenty of cash available to make additional accretive brand acquisitions.
The better news is that they should maximize every dollar of revenue through their digitally-focused sales strategy that significantly streamlines their operations. And its a strategy attracting several brick and mortar brands as well. Macy's (NYSE: M) recently announced its enhanced platform to drive online sales. And Naked Brands (NASDAQ: NAKD) went as far as divesting Bendon to rid itself of traditional brick and mortar overhead. Obviously, DBGI is capitalizing on its online opportunities. In fact, they believe they are one of the first to embrace the "future of retail."
Better still, they are positioned to drive revenues exponentially higher.
A Surge In Value In Q3
Undoubtedly, DBGI is better positioned than ever to increase its value-creating momentum in Q3. In fact, they already guided for that to happen, and to date, DBGI management has delivered on its promises. Moreover, by seizing on opportunities that set itself up for significant growth during the back half of 2021, a post-COVID economy could push sales well beyond expectations.
Best of all, the pieces to get that done are already in place. DBGI has compelling brands, excellent management, and a sales strategy that maximizes revenues. And with guidance calling for robust growth in Q3, with momentum building into Q4, shares at these levels, despite the 80% YTD increase, still present a compelling long-term investment opportunity.
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