The Sell-Off In Kornit Digital May Set Up A 2nd Half Opportunity


Kornit’s capitulation to the digital market could cause a rebound

Cornish (NASDAQ: KRNT) it seemed to be perfectly set up for the times, but times changed too quickly and that story is played out. The company manufactures, markets and services a range of digital printing applications for the textile and packaging industry. The company’s offers are at the forefront of the sector and are linked through intelligent connections that allow complete control at the touch of a button. The company’s problem now is that final markets ’efforts to mitigate inventories and a sudden delay in capital projects profoundly reduced second-half results halted the company’s growth.



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“The global recalibration of e-commerce growth, combined with macro headwinds that accelerated significantly in the last weeks of the quarter, as well as delays in the completion of customers’ production facilities, resulted in a significantly slower pace of clothing-order systems (DTG) in the second quarter compared to our previous expectations, ”said Ronen Samuel, CEO of Kornit Digital. “We have entered a period in which some of our customers are working with excess capacity built during the two-year pandemic period, which we hope will continue in the short term.”

Kornit is a rebound

The chance is that the business is expected to recover in early 2023, if not later this year, which puts the sale in a new perspective. In our opinion, the market expected bad news and received it. The sale is a major capitulation to the market and could easily lead to a surge in relief if not a real rebound. In the longer term, this company’s prospects are robust due to the nature of its business. Digital printing solutions will revolutionize the industry.

“We see significant opportunities after the pandemic with major brands and retailers shifting production from massive analog offshore production to short-term and offshore production, and we believe Kornit is well positioned to take advantage of these trends.” added Mr. Samuel.

Analysts continue with their goals, but the long-term vision of the community is still optimistic. The 6 analysts with current ratings have linked it to a moderate buy despite the two new rebates from Buy to Neutral. The real result, however, is the target price which was also cut. The highlight here is that the new $ 26 low price target expects about a 20% rise in these new low stock prices, while the consensus target drives three-digit gains.

“We maintain our purchase rating as we believe the bad news is now being announced and digital fabric printing is in (the) initial stage of adoption,” Citigroup analyst Jim Suva wrote in a note to customers while reducing the company’s price target to $ 50.

Institutions see potential in Kornit

Institutions also see potential in Kornit. Institutions bought a number of shares worth approximately 30% of the current market capitalization over the last year and hold more than 90% of the shares. That figure may grow now that stocks are trading at such a deep discount, but that remains to be seen. As it stands, stocks are trading at the lowest levels since the pandemic began and may go down. A break below the $ 22 level would be bearish and could cause another drop of 50% or more. However, if the market is able to establish support at or near the current level, we will see the trend of stocks sideways until there is a positive development of the business.
Selling to Kornit can create an opportunity for the second half



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