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The growth of e-commerce has created a major problem for me and many others: There are too many options to choose from.
Every time I go on Amazon to buy something new for my home, the selection is overwhelming. I don't have time to read every review and see all the flaws before I make a purchase.
Consumer products are part of our everyday life. From shaving to making coffee or cutting up fruit for breakfast, listening to music on our soundbar, and sitting in a chair for work. We are constantly buying new products. And when it comes to our money, we want to make sure we're getting the best product for the price.
I am often led down a rabbit hole of reading reviews and trying to find out if I've found the best product for what I need.
That's where Mohawk Group Holdings Inc. (NASDAQ: MWK) comes in.
You have heard of smartphones; now we have smart commerce. Mohawk, an under–the–radar consumer product company, is using an artificial intelligence (AI) platform to find product categories where there is no clear leader, improve the product by addressing user issues in negative reviews, and automate marketing and logistics to become the leading seller within the category.
Now this may sound like a mouthful, so let me explain how it works and why it's making Mohawk one of the best stocks to buy…
How Mohawk Is Revolutionizing E-Commerce
At its core, it uses an AI platform that takes millions of data points from product details to reviews and uses that to find, create, and sell what people need and want. There is a reason why it has some of the most popular home products on Amazon. From humidifies to knives, containers, shavers, and even soundbars, Mohawk has a business line for it. It has taken out the research for you and already found the best products on the market.
Unlike major corporations like GE, Procter & Gamble, and Honeywell that have seemed to slow on the innovation side, Mohawk has jumped to the front of the pack as a nimble, smaller player that is closer to the customer.
With Amazon as its main market for selling products, it is targeting a huge and growing platform. According to Marketplace Pulse, Amazon's marketplace sold an estimated $295 billion worth of products in 2020, increasing its sales by $95 billion in a single year. This market will continue to scale, and along with the incredible growth in e-commerce – which was roughly $4.4 trillion in 2020 and estimated to be over $8 trillion by 2025 – it could be a once–in–a–lifetime setup.
This is the perfect opportunity for a company like Mohawk to continue to grow. With 11 brands and over 280 SKUs, Mohawk is on a pace for a record 2021 of around $300 million in projected annual sales.
Mohawk does this all through its e-commerce engine, "AIMEE." This proprietary software drives new product development, automates sales, and marketing, and it manages the product life cycle, all creating a highly scalable business model. Mohawk understands that customers are data–driven, and it takes reviews, pricing, and social media all into account. This combined with the fact that over half of millennials have no real preference between private-label and national brands helps Mohawk to deliver the best products.
The best part is Mohawk has already proven itself. It has used AI and data to identify product trends across e–commerce platforms. Its brands include vremi (home appliances and kitchenware), home (window air conditioners to ice makers), xtava (hair products and tools), and many others.
Its brands have delivered exceptional revenue growth with 50% revenue CAGR since 2017, going from only $36.5 million to an estimate of $290 million to $320 million for 2021. These numbers, while big, seem very reasonable given the growth of the industry. On top of organic growth, Mohawk plans to launch up to a dozen new products each month with targets of roughly $1 million in annual sales per product. If it is able to continue to target the right industries, this could easy add $100 million to revenue.
While there is clearly risk involved with large corporation competition and the stock up more than 200% since late last year, if it can do $300 million in revenue, it could be worth much more than today.
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About the Author
Alex Kagin is the Director of Technology Investing Research at Money Map Press. He has spent the last decade working in equity research, most recently with Energy Capital Research Group (ECRG), where he led technology stock research along with working as part of a team developing a customizable financial data platform for securities analysis.
Prior to joining ECRG, Alex spent 8 years at DeMatteo Research, a boutique primary research firm and broker-dealer servicing the institutional investment community. He managed the Tech, Media, and Telecom vertical where he spent time connecting with hundreds of tech executives and hedge funds to get the pulse of the market.
Alex has a B.S. in Economics from American University and previously held Series 7 and 63 security licenses.