Digital Printing Expansion Will Unlock Sustainable Apparel Opportunities

Key Takeaways

• Rising digital adoption, sustainability trends, and innovative offerings are expanding Kornit's addressable market, strengthening its position against traditional competitors.
  
• Recurring revenue growth from its installed base and AIC model is improving margin stability and revenue predictability.
  
• Slower adoption of new business models and products, combined with weak consumable sales and rising customer concentration, risks sustained margin pressure and unpredictable earnings.

Catalysts

Develops, designs, and markets digital printing solutions for the fashion, apparel, and home decor segments of printed textile industry in the United States, Europe, the Middle East, Africa, the Asia Pacific, and internationally.

• Adoption of on-demand and mass-customization models by major apparel brands and print providers continues to accelerate, as seen by growing system utilization, new customer wins, and capacity expansions with large digital players; this supports future revenue growth through higher impressions and technology adoption.
  
• Momentum in converting the traditionally analog screen-printing segment to digital remains strong, with increasing penetration among mid-sized and large print service providers, a significant expansion of addressable market, and a pipeline that is expected to boost both ARR and system sales in 2026, driving top-line revenue and earnings.
  
• Kornit's recurring revenue stream from its all-inclusive click (AIC) business model and growing installed base is expected to increase meaningfully in 2025 and 2026, improving revenue predictability and supporting margin expansion due to high-margin consumables and services.
  
• Heightened regulatory and customer focus on sustainability is driving apparel and footwear brands to adopt waterless, eco-friendly digital printing solutions, which positions Kornit favorably to capture market share from traditional, less sustainable competitors-supporting longer-term growth and gross margin stability.
  
• Ongoing innovation, product launches (such as Apollo, Atlas MAX Plus), and targeted vertical/geographic expansion (including strategic partnerships and development deals with major global brands) are set to unlock new high-value markets, increasing potential revenues and enhancing operating leverage.

Kornit Digital Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Kornit Digital's revenue will grow by 6.8% annually over the next 3 years.
• Analysts are not forecasting that Kornit Digital will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Kornit Digital's profit margin will increase from -5.4% to the average US Machinery industry of 9.9% in 3 years.
• If Kornit Digital's profit margin were to converge on the industry average, you could expect earnings to reach $25.0 million (and earnings per share of $0.66) by about September 2028, up from $-11.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 48.5x on those 2028 earnings, up from -57.5x today. This future PE is greater than the current PE for the US Machinery industry at 24.0x.
• Analysts expect the number of shares outstanding to decline by 5.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.02%, as per the Simply Wall St company report.

Kornit Digital Future Earnings Per Share Growth

Risks

• Kornit's recurring revenue (ARR) growth and AIC model adoption are tracking below management expectations, suggesting that customer education and internal execution hurdles could delay the transition to a more stable, higher-margin business model, potentially weighing on revenue predictability and margin expansion in the near to medium term.
  
• Consumable and service revenue declined year-over-year, with ink revenue specifically impacted by customer inventory destocking; if customers continue to improve inventory management or find alternatives (e.g., third-party inks), this could lead to persistently softer consumables growth and pressure gross margins.
  
• Adoption of Kornit's new Apollo system and broader penetration into the traditional screen printing market are occurring at a slower pace than planned, due in part to long sales cycles, customer risk aversion, and the need for "lighthouse" reference accounts; this elongated transition risks pushing significant revenue growth further out, increasing dependence on near-term system sales and threatening overall earnings growth.
  
• Gross margin erosion (down to 46.3% from 48.6% last year) was attributed to weaker consumables and upgrade sales, and, coupled with continued negative adjusted EBITDA margins, this trend-if not reversed-could signal sustained margin compression and challenges to achieving target net profitability.
  
• Increased customer concentration (major strategic accounts driving a substantial portion of system sales and upgrades) exposes Kornit to revenue volatility and diminished pricing power should key clients delay investments, renegotiate terms, or shift to alternative production models, thereby undermining both top-line growth and earnings stability.

Valuation

• The analysts have a consensus price target of $23.917 for Kornit Digital based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $28.5, and the most bearish reporting a price target of just $20.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $252.9 million, earnings will come to $25.0 million, and it would be trading on a PE ratio of 48.5x, assuming you use a discount rate of 10.0%.
• Given the current share price of $14.47, the analyst price target of $23.92 is 39.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.