Impinj Stock in the Dumpster, But Revenue Growth Is Intriguing

Impinj, Inc.: PI Stock Takes a Hit But Revenue Growth Continues
iStock.com/Andrey Tolkachev

Impinj, Inc.: A Work in Progress Led by Good Revenue Growth

I’m back to the stock market trash bucket, searching for battered-down small-cap technology stocks that have been discarded by the broader market.

If you dig deep enough, you will generally find some orphan stocks that could recover, but things have to go right.

That’s the case with IMPINJ Inc (NASDAQ:PI), which, while up 15.2% this year, is trading below the midpoint of its 52-week range and a whopping 73% off its record high of $60.85 in June 2017.

If you decided to stop reading here, I’d understand. But for those with the stomach for some risk, Impinj stock is worth a look.

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The previous excitement that attracted buyers to PI stock was optimism toward its core “RAIN RFID” chip, which is used to connect companies wirelessly to their assets.

Clients using the Impinj chip can manage their critical assets and products. The technology is ideal for numerous applications where monitoring is key.

Impinj, Inc.’s client list is broad, including retail; transport and logistics; healthcare; industrial manufacturing; and hospitality, food, and beverage.

The PI stock chart isn’t exactly full of confidence, but there is some hope from a technical point of view.

Impinj stock is attempting to break higher. A move to $20.00 could see PI stock take a run at $25.00 and $38.00, representing a doubling of its current price.

Chart courtesy of StockCharts.com

That’s the best-case scenario for PI stock. The downside risk could be as low as $12.00.

Strong Revenue Growth Supports Bull Case for PI Stock

Impinj’s revenue has nearly doubled since 2014, from $63.8 million in that year to $122.6 million in 2018. The years from 2015 to 2017 saw the company’s revenue grow prior to a small decline in 2018.

Fiscal Year Revenue (Millions) Growth
2014 $63.8
2015 $78.5 23.1%
2016 $112.3 43.1%
2017 $125.3 11.6%
2018 $122.6 -2.1%

(Source: “Impinj Inc.,” MarketWatch, last accessed March 28, 2019.)

Moving forward, Impinj is expected to reenergize its revenue with growth of 14.9% to $140.9 million in 2019 and growth of 15.1% to $162.1 million in 2020. (Source: “Impinj, Inc. (PI),” Yahoo! Finance, last accessed March 28, 2019.)

At the same time, Impinj is burning through cash, with its generally accepted accounting principles (GAAP) losses increasing from 2016 to 2018.

Fiscal Year GAAP Diluted Earnings Per Share Growth
2014 -$0.54
2015 -$0.51 5.5%
2016 -$0.74 -44.5%
2017 -$0.84 -13.5%
2018 -$1.65 -96.6%

(Source: MarketWatch, op cit.)

On an adjusted basis, the loss is smaller and is expected to narrow over the next two years.

For 2019, Impinj, Inc. is expected to report an adjusted loss of $0.61 per diluted share, versus a loss of $0.68 per diluted share in 2018. The loss is predicted to fall to $0.35 per diluted share in 2020. (Source: Yahoo! Finance, op cit.)

The company’s free cash flow (FCF) is negative, but it saw a big improvement in 2018. The hope is that, as losses narrow, the FCF picture will improve.

Fiscal Year FCF (Millions) Growth
2014 -$1.9
2015 -$4.0 -116%
2016 -$13.0 -226.2%
2017 -$42.4 -225.8%
2018 -$18.1 57.2%

(Source: MarketWatch, op cit.)

Analyst Take

My view is that Impinj stock has been beaten up enough, and that things will turn around.

If Impinj, Inc. can deliver on the revenue side and move toward profitability, there wouldn’t be any reason why PI stock shouldn’t ratchet higher.