Is This the Final Implosion for Impinj?

February 2, 2018 by Jon C. Ogg

It’s a bad day at a company when management sees its shares lose almost half of their value. And it’s equally as bad for investors who may have just been stopped out or forced out of the shares at a deep loss. When every single shareholder is now underwater, it seems more than fair to ask if there is a risk of implosion.

Impinj Inc. (NASDAQ: PI) disappointed Wall Street after the radio frequency identification (RFID) sensor technology-maker warned that its revenue for the first quarter will come in short of its expectations and short of analyst estimates. Wall Street analysts threw in the towel as well on news of a key executive departure, and it turns out that the former high-flyer has now wiped out every shareholder who has bought since its IPO date.

The company expects its fourth-quarter 2017 revenue to be between $29 million and $30 million, which was actually above its prior guidance of $28.25 million to $29.75 million. Where the problems came up is that Impinj’s first-quarter revenues are now forecast to be in a range of $20 million to $22 million, versus almost $30 million as a consensus estimate.

The company blamed shortened endpoint integrated circuit (IC) lead times contributing to a reduction in its endpoint IC order backlog, as well as ongoing reductions in inlay-partner inventories. And despite continued growth in the endpoint IC consumption and in the number of deployments by end users, Impinj now anticipates softness in the company’s endpoint IC volumes.

Its shares already had backed off of speculative exuberance earlier in the week after Amazon said that its new checkout-free grocery store does not use RFID. Investors had hoped that RFID would be used in the stores.

And to add insult to injury, Impinj also announced that its chief financial officer, Evan Fein, will leave the company after 17 years of service. The only good news is that it is not an immediate departure, with a March 30 effective date. The reasons cited were to “spend more time with family and to pursue other opportunities.” Fein did note that he is committed to supporting a smooth transition and that he would assist in the transition of responsibilities.

Canaccord Genuity downgraded Impinj to Hold from Buy and lowered its target to $20 from $35. Dougherty downgraded Impinj to Neutral from Buy. RBC Capital Markets also downgraded it to Sector Perform from Outperform and lowered its price target down to $17 from $41. Needham lowered its rating to Hold from Buy after throwing in the towel. And Piper Jaffray maintained its Neutral rating, but it cut its Impinj price target to $18 from $27.50.

Impinj is no stranger to volatility and controversy. Its shares have had multiple downward waves over the past year. The stock briefly hit $60 in June of 2017, but then it gapped down to under $40 from almost $50 in August. And at the start of November, its shares gapped down to under $25 from about $33.

To prove that this is a controversial stock: its short interest has been more than 6 million shares in every short interest reporting period since the end of last September. Most recently that was counted as more than 16 days to cover, according to Nasdaq data.

Impinj’s co-founder and CEO tried to talk up the long-term prospects, but the comments fell short. He said:

We anticipate additional growth in our own inventory in first quarter 2018 to coincide with our endpoint IC volume softness. We remain confident that our inventory does not have material obsolescence risk. We also have adequate endpoint IC supply in a year of global semiconductor wafer tightness. Our cash position remains strong even as we balance short-term expenses with a reduced short-term revenue outlook. … Identifying, locating and authenticating every item in our everyday world, and connecting every one of those items to the cloud, is the vision our ever-growing base of dedicated partners and end customers look to us to deliver. My conviction in our long-term opportunity, even in this time of volatility, continues to strengthen.

What hurts so bad about this last move is not just that the drop is well over 40%. Impinj was an Internet of Things winning initial public offering back in 2016 and into 2017. The company sold 4.8 million shares at $14.00 apiece, and then shares went up as much as 300% or so by mid-2016.

Impinj was last seen down about 45% at $12.65 a share on over 6 million shares traded. Its stock hit an all-time low of $12.40 on Friday morning, and that means that there is no single shareholder who bought Impinj stock on the open market since its IPO that has made a profit.

It’s far worse than just a bad day when there are no profitable outside and independent shareholders holding shares of a company.