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Digital Brands Group, Inc. (NASDAQ: DBGI) provides premium apparel on a direct-to-consumer and wholesale basis through its various brands. While DBGI stock dropped by more than 79% after announcing a public offering, many investors are confident this could be a dip buy opportunity. With this in mind, DBGI stock could be poised for a rebound soon as the company is preparing to finalize a profitable acquisition.
DBGI Stock News
Through its premium brands, DBGI has revolutionized direct-to-consumer and wholesale apparel brands by utilizing its business model. As 80% of Americans prefer to do their shopping online, digital transactions captured a major wallet share – leading many stores to close their businesses. Meanwhile, digital native brands are not sustainable since they struggle to acquire customers and grow their market share. For this reason, DBGI has been capitalizing on the benefits of both models to drive-up sales to achieve financial growth.
Meanwhile, since it is rare for customers to wear the same brand from head to toe, DBGI is capitalizing on this by offering several products across its brands. Based on this, the company has the potential to realize revenues from its offerings across several categories. At the same time, DBGI owns its customers’ data which allows it to capture its customers’ shopping behavior and style preferences. In this way, DBGI is able to cross merchandise styles for every customer using all the brands under its umbrella to create personalized looks for customers. In light of this, DBGI could be well-positioned for substantial financial growth as it continues building its customer base.
With the company looking to further grow this business, DBGI entered into an agreement to acquire Sundry – a global lifestyle apparel brand. To facilitate this acquisition, DBGI will pay $5 million in cash to Sundry, $7 million in cash or shares at the option of Sundry, as well as an equity investment of $20 million. As the company is set to pay such a fee for the acquisition, it is clear that DBGI is confident it could significantly increase its revenues in the future. On that note, Sundry grew its revenues in 2021 to $22.8 million from $19.9 million in 2020. In light of this, DBGI stock could be well-positioned to run once the acquisition is finalized.
With this in mind, Sundry already has an established customer base. Considering DBGI’s business model, DBGI could cross market its other brands’ products to Sundry’s customers which could drive up brand awareness and demand for the company’s brands’ products. At the same time, acquiring Sundry could create substantial synergies between DBGI’s brands which would significantly reduce customer acquisition costs and increase customer retention rates. Moreover, DBGI intends to utilize Sundry’s large direct-to-consumer list to drive up sales for its other brands’ products. Considering this acquisition’s potential in growing the company’s business, DBGI stock could be one to hold in anticipation of the acquisition’s closing.
Aiming to raise funds to accelerate the closing of Sundry’s acquisition, DBGI issued 37.3 million shares at $.25 per share in a public offering back in May. In addition, DBGI granted the underwriters a 45-day option to purchase up to 5.6 million shares at the offering price. While DBGI stock price plunged more than 79% upon announcing this offering, the company successfully raised $9.3 million in gross proceeds which could be pivotal for the company to finalize its much anticipated acquisition. Moreover, DBGI used $3 million of these proceeds to repay a promissory note. Given that the stock is currently trading near all-time lows, DBGI stock could be a low risk investment as the company’s upcoming acquisition could send the stock soaring.
In the meantime, DBGI is facing the risk of being delisted from the NASDAQ after receiving a determination letter from the NASDAQ in July. This letter was sent to DBGI since the company has not regained compliance with the MVLS standard as its MVLS is below the required $35 million to continue listing on the NASDAQ. With this in mind, DBGI requested a hearing before the NASDAQ Hearings Panel to appeal the letter with the hearing scheduled for September 8.
During this hearing, DBGI will provide the panel with its plan to regain compliance with the minimum MVLS standard. As the company believes its plan will be sufficient to permit the company to regain compliance with the minimum MVLS requirement, many investors are bullish Sundry’s acquisition could be finalized soon. In light of this, DBGI stock could be one to buy at this dip considering its upside potential.
DBGI Stock Financials
According to its Q1 report, DBGI reported $36 million in assets including $566 thousand in cash – a slight decline from the previous quarter where the company had $36.4 million in assets. In addition, the company’s liabilities increased to $49.6 million compared to $43.5 million in Q4 2021.
As for revenues, DBGI witnessed substantial growth compared to a year ago as revenues increased to $3.4 million from $408.4 thousand. However, operating costs increased significantly to $7 million compared to $2.1 million a year ago. In light of this, DBGI reported a net loss of $7.8 million compared to a net loss of $3 million in the same year-ago period. Meanwhile, DBGI is preparing to release its Q2 financials on August 15 premarket. If the company continues to grow its revenues substantially, DBGI stock could be poised for a run.
@MayaTrades is confident DBGI could break $.66 to regain compliance with the minimum MVLS requirement.
@BeginnerInvest4 is bullish DBGI could break $.5 soon.
DBGI stock is currently trading at $.1740 and has supports at .1305, and .10. Meanwhile, the stock shows resistances near .1780, .2250, and .4825. Following the stock dropping more than 79% since announcing its latest offering, DBGI has been gaining investors’ attention as a low risk play as it reached an all time low. Considering the potential of Sundry’s acquisition, DBGI could be set to surge upon finalizing the acquisition.
DBGI recently retested its resistance multiple times without breaking through it. Based on this, DBGI stock could be on track to drop near its support which could be an ideal entry point. However, it should be noted that DBGI is witnessing significant momentum which could send the stock past its resistance. In that case, another entry point could be near $.18 if the stock manages to hold this support. Given that DBGI used to trade past $1 in April, DBGI stock has an upside potential of 500% if it returns to trade at its previous price levels.
As the stock is gaining momentum lately, accumulation is trending upwards and the MACD is bullish. Meanwhile, the RSI cooled off from 81 to 69 indicating that DBGI stock remains overbought. Based on this, investors could wait for these indicators to reset to enter a position in DBGI stock at a lower PPS. DBGI has an OS of 52.2 million and a float of 46.8 million.
DBGI Stock Forecast
As the company is trading near all-time lows, DBGI stock is emerging as a low risk play among many investors. Considering that the acquisition of Sundry could be announced soon, DBGI could be worth investing in at its current low PPS. In addition, the company’s upcoming Q2 financials could be a major catalyst to watch as DBGI could be on track to continue growing its revenues. In that case, DBGI stock could witness a run – making its current PPS a bargain.
Meanwhile, investors should be wary of DBGI’s potential delisting from the NASDAQ. With the company’s hearing with the NASDAQ Panel scheduled for September 8, many investors are bullish the acquisition of Sundry could be finalized by this date. Since this acquisition could help the company regain compliance with the MVLS minimum requirement, DBGI stock could be one to watch this month in anticipation of news.
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