Kornit (KRNT, NASDAQ): Why Is Amazon Spending $150 Million On Their Digital Printers?

Mar 12

Kornit (KRNT, NASDAQ): Why Is Amazon Spending $150 Million On Their Digital Printers?

For the garment, apparel, and home textile industries, Kornit’s digital printers are likely the biggest game changer in a century.


KRNT -- online


To me, Kornit is an obvious opportunity and their digital printers will continue to take market share from analogue textile printers for the following key reasons:

  • Pollution:  Some say the textile industry is the world’s 2nd largest polluter.  It consumes an extraordinary amount of water, creates gaseous emissions, and generates a huge volume of toxic chemicals;


  • Compared to screen printers, Kornit saves time and money.  Pre-production setup time can be reduced by 90%.  Clothing retailers (the ones still in business) are shifting to online orders and “fast fashion”.  That means small batch orders.  Kornit is now more cost competitive on order sizes below 500 pieces;


  • Infinite design flexibility and speed to market.  A new supply chain is developing – “demand leads supply”.  Then there’s “reverse logistics” – people are buying online and if they don’t like the product they return it.



Kornit’s digital printers are eco-friendly.  It isn’t a wet process, so no water is needed.  And the dyes used are non-toxic.


Importantly, this is a patented process.


KRNT -- patents


Kornit employs a razor/razor blade business model – they sell the systems (cost is between $60,000 and $800,000) and they sell the ink.


Therein lies a key point – Kornit printers only work properly with Kornit ink, which provides for significant operation leverage!


Here’s why a customer wouldn’t want to use a “fake ink” product in Kornit’s printers, and how it should maintain this lucrative recurring business:

  • Warranty expires;


  • Fake ink risks damaging the system and will clog the ink jet heads;


  • An RFID software system on each Kornit printer will recognize the imposter ink and slow it down.



Obviously, Kornit has gone to great lengths to protect the ink side of its business (which represents 40% of revenues, and growing).


The shift toward digital is underway, but we’re still early in the process.


KRNT -- mkt size


How do we know Kornit has the best digital printers?


For one, according to Kornit, its competitors (Epson and Brother) are not capable of providing a printing process that does not require multiple steps and pre-treatment. Another indication would be that Amazon is its largest customer.


“Customer demand for graphic t-shirts offered through Merch by Amazon continues to grow rapidly, and more developers and content creators join the service every day,” said Miguel Roque, Director, Merch by Amazon“Kornit’s ability to deliver solutions and support that meet our high quality and high volume manufacturing requirements will help us to continue expanding program capacity to meet customer requests.”


As per the agreement, Amazon will spend $150 million with Kornit over a 5-year period.  In return, Amazon will get 2.9 million warrants to buy KRNT at $13 per share.


With help from Amazon and a growing list of customers around the world, sales to Asia and Europe were up 30% last year.  The company has eclipsed $100 million in sales (20% CAGR since 2014).


In addition to the business opportunity and price, I like the chart!  KRNT is in a well established uptrend, yet sitting very close to strong support around $12 per share.


KRNT -- ch 318


Via KRNT you and your family can capitalize on one of the most important technological advancements to ever hit the textiles industry. You need look no further than “Merch” and how Amazon is using Kornit‘s digital printers. They plan to buy $150 million worth over the next five years (they also took a large equity stake in KRNT).


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*Author has a long position in Kornit


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