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Why Impinj Stock Tumbled 35% in 2018

By Jeremy Bowman – Updated Apr 18, 2019 at 4:50PM

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Shares of the radio frequency ID specialist sold off as revenue declined over much of the year.

What happened

Shares of Impinj (PI -4.71%) took a hit last year as the maker of radio frequency ID tags used in apparel retailing and other industries saw demand suddenly turn soft early in the year. As a result, revenue declined over much of 2018, and the company spent much of its time trying to overcome that setback. According to data from S&P Global Market Intelligence, the stock fell 35% over the year. 

As the chart below shows, Impinj stock plunged in the beginning of February when the company lowered its guidance to account for weak demand, and its shares remained volatile over the course of the year.

PI Chart

PI data by YCharts.

So what 

Impinj stock plunged 47% on Feb. 2 as the company slashed its outlook in a quarterly update, saying that shortened lead times in production led to a reduction in its integrated circuit backlog. Therefore the company was forced to cut its first-quarter revenue forecast to a range of $20 million to $22 million, representing a decline of 34% from the previous year at the midpoint of that range. Separately, the company also said that CFO Evan Fein would be stepping down, though his departure appeared to be voluntary. 

A close-up image of an RFID tag

Image source: Getty Images.

Impinj had actually recouped all of the stock's early losses at one point as the price bounced back when the company's first-quarter earnings report came out in May. That report showed revenue came in above its previous forecast at $25.1 million, and management said it would return to revenue growth by the fourth quarter of 2018. 

Momentum carried the stock higher in the following months. But it gave up much of those gains in the beginning of August when the company said its second-quarter earnings report would be delayed due to an internal investigation in response to an employee complaint. 

In September, the stock surged when the company concluded the investigation by saying it had found no wrongdoing, and beat expectations in its second-quarter report.

Over the rest of the year, the unprofitable stock fell alongside the broader market sell-off, as even a return to revenue growth in its third-quarter report wasn't enough to buck that trend.

Now what 

Impinj shares have gotten a boost out of the gate in 2019, as the stock is up about 10% through the first two weeks of the year. This should be a kinder year for the company as it laps the impact of the demand softness in 2018.

But there are still bigger questions Impinj needs to answer, including whether it can ever be a sustainably profitable company, especially considering its questionable profit adjustments. Given that, I'd remain skeptical of Impinj until the company shows it can deliver consistent profits.

Check out the latest Impinj earnings call transcript.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Impinj. The Motley Fool has a disclosure policy.

Stocks Mentioned

Impinj Stock Quote
Impinj
PI
$121.54 (-4.71%) $-6.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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