Kornit Digital (KRNT) – Lineup Expansion
Kornit Digital (KRNT) has been a favorite name for Jaguar clients for years, with the first ever write-up occurring on June 3rd, 2018 in W/E Research when the stock was trading at $17. Most recently, we made it a Top Pick in the JaguarAnalytics Q1 Outlook where it finished the quarter up 8.2%. The next catalyst for the company will be its Q1 earnings report next week on May 11th. Among other items that will be discussed on the call, look out for new commentary on recent product expansions.
More specifically, last week, Kornit announced the release of its new MAX technology, establishing a new standard for on-demand fashion and apparel production. Recall, back in third quarter, the company closed an important deal with Creazioni Digitali, a leading Italian digital fulfillment partner to some of the largest fashion brands in the world, including Versace. Management remarked at the time, “Important wins like this at the heart of the fashion industry makes us confident in our own ongoing ability to disrupt this large market with our unique technology and we are already witnessing massive growth in our DTF supplies.”
A key feature of Kornit’s MAX technology is XDi, which delivers “revolutionary 3D capabilities for new, high-density graphic decoration that can simulate embroidery, vinyl, and heat transfer in a single, waste-free digital process.” The new XDi allows fulfillers and brands to expand their offerings to include new-to-market, innovative decorations without the inefficiencies and cost of operating analog technologies.
Kornit also debuted the ActiveLoad Automation technology, a new robotic system to significantly ease the burden of manual and labor-intensive media handling in the textile decoration industry. This increases total output per shift while ensuring minimal downtime and exceptional reliability. The new patent pending ActiveLoad Automation technology ensures continuous production and consistency, while decreasing human error and fatigue, regardless of employee experience and training, for ultimate results and best operational efficiency.
Stifel analyst Patrick Ho, who has a Buy Rating and $110 price target on the stock, believes this aspect is another benefit provided for existing customers, as well as potential new customers that are looking for reasons to shift from traditional analog operations. “We believe the introduction of both of these technologies highlight the differentiated technology Kornit possesses, and its aggressive push to accelerate the shift to digital printing for the fashion/apparel industry.”
The first product with MAX technology is now commercially available in the Kornit Atlas MAX (Shown Below), a carbon-neutral, industrial-scale DTG production system, providing unsurpassed retail quality, exceptional color-matching capabilities, and a wide, vivid color gamut, with exceptional durability. The Atlas MAX is delivered with the new XDi technology built in, for 3D printing capabilities. An upgrade to the Kornit Atlas systems will be available during the first quarter of 2022.
Stifel would add that while they are uncertain on the financial implications at this time, they note that its upgrade/extension could provide a further lift to its margin profile. Again, they have no follow up with management on this new product, BUT their experience on the semiconductor equipment end strongly suggests a potential increase in margins given that semi tool extensions and upgrades almost always carry higher margins (given the higher software and application content) than the actual hardware/system sale.