Morgan Stanley thinks Wall Street overreacted to Kornit Digital’s latest revenue guidance, and shares in the Israeli fabric printing company now present a favorable buying opportunity. The Wall Street bank upgraded the maker of digital printing technologies for the garment industry to overweight from equal weight on Thursday, with a $29 per share price target. Morgan Stanley’s forecast implies more than 30% upside from Wednesday’s $22.23 close. Kornit Digital shares are higher by 6.6% in 2023 after climbing more than 10% early Thursday. The company not only make commercial inkjet printers, but also chemical products for textile makers. KRNT YTD mountain Kornit Digital stock has shed 3.2% from the start of the year. The company posted a smaller-than-expected quarterly loss of an adjusted 15 cents per share on Wednesday, on $56.2 million in revenue. Analysts polled by FactSet forecast an adjusted loss of 20 cents per share on $57.5 million in revenue. Shares fell more than 20% on the report. But Morgan Stanley analyst Erik Woodring says the market reaction to Kornit’s lower second-half revenue forecast, which he says came in 7% below consensus estimates, was too severe. Woodring attributed the weaker forecast to “continued weak capital spending and deals elongating,” which will ease over the long-term. “[W]e don’t believe near-term weakness dampens Kornit’s 2024 outlook, where we forecast a return to double digit Y/Y revenue growth and Adj. EBITDA profitability, catalyzed by a strong pipeline built out at the ITMA [International Textile Machinery Association] trade show in June and continued strength in system upgrades,” Woodring said. — CNBC’s Michael Bloom contributed to this report.
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