One key area for businesses of all sizes moving forward is the ability to leverage data and incorporate insights from that data to make important business decisions. This is especially true for smaller and mid-sized e-commerce businesses selling on Amazon, Shopify, and Walmart. Many third-party sellers lack the ability to scale their businesses beyond a certain size. This is where companies like Mohawk come in with the ability to make accretive acquisitions and acquire brands with marketplace dominance to help scale these businesses.
Mohawk’s proprietary AI-based software AIMEE drives new product development, automates sales and marketing, and manages the product life cycle. The software utilizes data analysis to streamline a number of different tasks including product selection, new product launches, forecasting, marketing variables, pricing and media buying decisions in real-time, ROI tracking of investment, and more.
Mohawk has its own platform and fulfillment capabilities in place to manage the entire product life cycle from procurement and manufacturing to shipping.
Mohawk serves the rapidly expanding e-commerce and DTC markets. The company does not have many limitations on the product categories that they choose to pursue or the marketplaces they choose to operate on. The company currently has over 1,000 SKUs across 12 brands that sell DTC on Amazon, Walmart, and Shopify. Management noted an 80% success rate on products going from the launch phase to the sustain phase, which they expect to reach within 3 months of the initial launch.
Mohawk plans to ultimately grow its portfolio to include thousands of unique products with profitable and recurring revenue streams that are managed entirely by AIMEE. Mohawk intends to grow through the creation of its own new brands organically and through its accretive M&A strategy targeting smaller 3PS sellers that lack the ability to scale their businesses. Mohawk will continue to target brands that lack the resources to effectively scale beyond a certain point. Once acquired, Mohawk states it is able to integrate new brands with AIMEE as early as 48 hours after completion.
2021 is projected to be the strongest years in Mohawk’s history from a fundamental perspective.
Accelerating Revenue Growth
2021 is projected to be Mohawk’s best year for revenue growth.
Expecting to Reach Profitability in 2021
Mohawk is projecting to breakeven on EPS in 2021.
Improving gross margins
Improving Free Cash Flow and Already Free Cash Flow Positive
Operating Margins Improving, although still not positive
From a fundamental perspective, 2021 will be Mohawk’s strongest as a public company. The acceleration to 87% YoY revenue growth along with EPS profitability are two important factors that could drive the stock price higher this year.
Additionally, Mohawk is already FCF positive and has continued to improve its gross margins over the last several quarters. Operating margin remains negative at -19.5%, but we note that Mohawk has also seen a big improvement in this number in its most recent quarter.
In the midst of the recent tech rout, MWK’s valuation has contracted, and the stock is now trading at 3.3x 2021 revenue. This is an attractive multiple for a company that is projected to grow 87% this year, reach EPS profitability, and is already FCF positive.
MWK stock has exhibited relative strength during the recent tech pullback and is set to announce earnings AH Monday. We are monitoring for an entry as we believe 2021 will be an outstanding year for Mohawk, and there is ample room to grow from the company’s current ~$1B market cap.