6 Reasons Why Mohawk Group
Holdings, Inc. (NASDAQ:
MWK) is Ripe For a Squeeze
Sacramento, CA -- March 3, 2020 -- InvestorsHub NewsWire --
via SpotlightGrowth.com -- Mohawk
Group Holdings, Inc. (NASDAQ:
MWK) is among the most exciting stories within the technology-enabled consumer
goods industry. The company’s proprietary AI Mohawk E-commerce
Engine (AIMEE) helps Mohawk understand underlying trends, emerging
products/features, consumer sentiment, and more.
Combining its advanced proprietary AI platform with its
streamlined manufacturing partnerships allows the company to launch
new products within a six-to-eight-month period. This is far more
efficient and faster than any of the legacy consumer packaged goods
companies, which still largely rely on old methods and procedures.
In essence, Mohawk Group is the consumer-packaged-goods (CPG)
company of tomorrow.
Source: Mohawk Group
The recent trading activity does not represent Mohawk, in my
opinion, as the overall stock market has seen some of the most
intense volatility since the 2008 recession. This has created a
potential opportunity for investors to use the recent volatility to
gain exposure to an advanced technology-based consumer company.
Here are six reasons why investors should pay more close attention
to Mohawk:
1. MWK Trading at a Discount to its Sales, 32 New Products
Released in 2019
As mentioned above, Mohawk’s streamlined operations help the
company bring its products to market faster thanks to its
manufacturing partnerships and AIMEE platform. As
such, the company can utilize its AI platform to develop products
that are in high-demand or experiencing strong consumer sentiment.
In 2019 alone, Mohawk launched a total of 32 new products,
including 20 during the second half of 2019.
Using e-commerce sales channels like Amazon, Mohawk can get its
products in front of online shoppers, which allows the company to
avoid headaches and excess costs associated with running a
brick-and-mortar location.
AIMEE Dashboard; Source: MWK
Currently, Mohawk is seen trading at a discount to its
price-to-sales ratio, which currently stands at 0.59. Mohawk’s P/S
is even more undervalued when compared to the S&P
500’s P/S ratio of around 2.4 and the “personal & household
products” industry average P/S ratio of 3.48.
This is important because this shows that Mohawk could fall
under the “growth at a reasonable price,” or GARP, category. At a
time when valuations are constantly a worry on Wall Street, MWK
brings a breath of fresh air and highlights that there are still
potential opportunities out there in the market.
2. Strong Institutional Ownership, Including World’s Top 3
Asset Management Firms
Institutional shareholders are another important characteristic
that should be followed by any company. Having a strong roster
of institutional
backing can often be interpreted as not only a positive
but also as a confirmation of an investors' perceived bullish
thesis.
Source: Morningstar
Mohawk sports a strong roster of institutional firms that have
invested in the company. Among the institutional shareholders at
MWK include the world’s top three asset management firms by assets
under management (AUM): BlackRock, Vanguard, and UBS.
Outside of the “big three,” Mohawk shares can be found in Morgan
Stanley brokerage accounts, at hedge fund Hudson Bay Capital
Management, and more. Rovida Advisors, Inc., an asset manager out
of New Jersey, is the largest institutional shareholder with 3.04%
ownership of the company.
3. Artificial Intelligence Interest and Consumer Sentiment
Remain Very Strong
Over the past several years, the economy has seen modest growth,
but two areas remain very strong: advanced technologies and
consumer sentiment.
From automatic chatbots to self-driving cars, artificial
intelligence (AI) continues to ingrain itself throughout our daily
lives. AI helps increase efficiencies, provides greater analysis
& simulation benefits, construct new products, automate
repetitive processes, and more.
According to Allianz, AI technologies are
estimated to boost profitability across 16 industries by an average
of 38% by 2035.
Meanwhile, U.S. consumers continue
to see the highest sentiment levels in years. The University of
Michigan consumer sentiment index was revised higher for February
2020 to 101, up from a preliminary reading of 100.9. This is the
highest reading since March 2018.
Source: Trading Economics
American consumers remain strong and upbeat despite the
coronavirus outbreak and its impact on global stock markets.
However, being that employment continues to show strong
characteristics, this will help the average consumer continue
positive sentiment.
For Mohawk, which sits at the intersection of AI and consumer
packaged goods, these outlooks are extremely reassuring and
positive to its bottom line.
4. Mohawk Has Three Analysts Ratings With an Average Rating of
“Buy” and Price Target of Over $10
Another important piece of fundamental analysis to consider when
conducting research is analyst coverage and rating. While analyst
ratings are by no means a “one-and-done” aspect of fundamental
research, they do impact the underlying stock and should be
followed closely.
Source: Mohawk
Mohawk Group has three analysts covering
its stock: Alliance Global Partners, DA Davidson, and National
Securities. Alliance rates MWK a “buy” with a price target of $12.
DA Davidson also rates MWK a “buy” and holds a price target of $9.
Lastly, National Securities gives MWK a “buy” rating and a price
target of $10.
When considering the averages, Mohawk has an average consensus
of "buy" and an average price target of $10.33. This represents an
upside potential of 186.15% when considering its current share
price of $3.61. Based on these ratings, it is fair to say that
analysts remain bullish over the long-term on Mohawk.
5. Technical Analysis Shows Weakening Bearish Sentiment,
Bullish Squeeze in the Cards
When conducting investment research, technical analysis should
be an important aspect alongside fundamentals. Technical analysis
is derived from price action and its impact on various indicators
and oscillators, which can help determine the underlying strength
of an up or downside move.
February 2020 was a brutal month for stock markets around the
globe, thanks to the coronavirus outbreak. However, with global
indices looking to rebound, this spells good news for smaller
stocks and companies.
Mohawk’s technical analysis shows a weakening bearish trend,
which can be determined with its moving average convergence
divergence (MACD) and related histogram essentially at zero. This
means that the bearish strength of the downturn in MWK has steadily
been weakening since early February 2020. The MACD is now trending
sideways and is on watch for a potential bullish crossover.
Source: Yahoo Finance
Stochastics help measure the momentum of an underlying
security's movement. The oscillator can help show periods where
momentum is overextended or oversold. MWK's stochastics show that
the stock is just outside oversold territory at 25.86. A bullish
stochastics crossover is currently on watch for Mohawk.
The relative strength index (RSI) is another common indicator used in
technical analysis, which is another momentum tool that can help
show “the magnitude of recent price changes to evaluate overbought
or oversold conditions in the price of a stock or other asset.”
An RSI of 70 or higher is considered overbought, while a reading
of 30 or below is considered oversold. Mohawk’s RSI currently sits
at 30.22, which puts it at nearly oversold conditions. For
contrarians, this could represent an opportunity.
6. Q4 and FY 2019 Earnings Release Set For March
5th After the Close
On Thursday, March 5, 2020, Mohawk Group Holdings is set to
report fourth-quarter and full-year 2019 earnings results after
the market close. Management will be holding a conference call
later that afternoon at 5 pm EST.
Earnings can often serve as a potential bullish or bearish
catalyst for an underlying stock. Mohawk’s upcoming earnings
release this week highlights a potential catalyst upcoming.
Investors and analysts will be eagerly awaiting results and
listening closely to management’s outlook and commentary on 2019
earnings.
In January 2020, Mohawk released the
preliminary fourth-quarter and full-year 2019 earnings.
For the fourth quarter, management estimates that the company will
see net revenues between $25-26 million, which would represent
quarter-over-quarter growth between 27%-32%. For the full year
2019, Mohawk estimates net revenues between $114-115 million, which
represents year-over-year growth between 56%-57%.
Overall, Mohawk Group Holdings is an exciting company with a
business model that is set to thrive both today and in the future.
Combining its proprietary AIMEE AI platform with its streamlined
manufacturing partnerships, Mohawk has a powerful business model
that is currently under-appreciated by the investment community.
However, with growing positives and upcoming catalysts, Mohawk
looks like it could be ripe for a squeeze higher.
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