Decibel Cannabis Company Inc. (DB-X) has rapidly emerged as a “dominant” player in the premium craft market, according to Raymond James analyst Rahul Sarugaser.
“Watching our channel data during the last 12 months, DB claimed #9 market share position among all Canadian LPs by retail sales, capturing 3 per cent of all Canadian adult-use cannabis sales forcing us to ask: ‘Who the heck are these guys?!,’” he said. “Well, they’re craft cannabis pros, and we see their ability to build sought-after brands — Qwest premium family of brands, General admission mid-market brand—made up of uncompromisingly high-quality cannabis jettisoning this group to the top of the Canadian cannabis pecking order.”
In a research report released Thursday, he initiated coverage of the Calgary-based company with an “outperform” recommendation, touting its position in the fastest-growing segment in the Canadian market, which he notes “is clearly being valued at a premium by the largest players in the sector.”
“DB’s marriage of ultra-premium priced, microgrow-quality cannabis, strong-selling mid-market offerings, deep roots in cannabis culture (Canada and U.S.), and national-scale production and distribution is what makes this company so notable in our eyes,” he said. “DB is already punching well above its weight among Canadian LPs—capturing significant market share with its quick revenue ramp during the last 5 quarters — but we believe DB is on the cusp of an even more intense revenue inflection as the company realizes a more than 400-per-cent scaling of its cultivation operations by 4Q21.”
He set a target of $1 per share, exceeding the 60-cent average on the Street.
“While DB stock has certainly run during the last 12 months (up 250 per cent), we believe the stock has a lot more room to run, given the company has, historically, been so severely underappreciated,” he said. “DB remains an off-the-radar cannabis story, and the market has been very slow in giving the company credit: a significant early opportunity we identify for our clients. There’s a lot of meat left on the bone here.”