The views expressed below are those of Anchor Capital Advisors, LLC (“Anchor”) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.
Mohawk Group Holdings Inc. is a leading technology enabled CPG company that uses data and software to optimize product development and placement primarily on Amazon.The company was founded in 2014, and is headquartered in New York, NY.
In our opinion, MWK has a high scalable platform that serves the massive e-commerce space. We believe the company has the opportunity to organically grow with e-commerce, and supplement that growth with acquisitions of e-commerce brands on Amazon. We also believe the company has the opportunity to roll out their same data based engine into platforms outside of Amazon, and internationally. Finally, it is our opinion that the company has the opportunity for strong margins in the future, and strong growth for years to come.
Confirmation through Research
The company utilizes its own software platform, Artificial Intelligence Mohawk Ecommerce Engine (AIMEE®), across the company’s entire product lifecycle. Mohawk uses AIMEE® to see what products have bad reviews on Amazon, and they can quickly create better versions in 6 to 8 months. Further, AIMEE® allows the company to see opportunities where they could enter in product development. From our view, the company currently comes out with approximately 5 products per month, and could produce 10 per month in the future. Further, we believe the company has the opportunity to buy Amazon brands at reasonable valuations. In terms of opportunity, even .5% of Amazon Marketplace 5 years out would equate to $3 billion in revenue, which is 10x their current size.We believe the company will enter other e-commerce sites including Alibaba, Rakuten, and JD, as well as launch products within Amazon Europe. In our opinion, MWK the has the opportunity to be a 10% EBIT margin business in the long run with 45%+ gross margins. If the company executes, we believe it could do over $1 billion in revenue and be worth a multiple of what we paid for the business.
In our opinion, the market is not assigning fair value to the business considering the AIMEE® technology, the growth of the business, the total addressable market, and the opportunity for margin expansion. Over time, we believe the business will become recognized as it continues its strong organic and inorganic growth.