Impinj (NASDAQ:PI) has been one of the more disappointing tech IPOs in recent years as the radio frequency ID (RFID) chip maker has essentially traded flat since its 2016 debut. In fact, Impinj's revenue even declined in 2018 as the company faced a shrinking backlog in its integrated circuits, or RFID chips, due to shortened lead times in production. Though the company seemed to believe that was just a short-term headwind, it signaled potential concerns about demand for the circuits, which could be more than a temporary issue.
For instance, in its fourth-quarter earnings report, Impinj projected revenue of $30 million to $32 million in the first quarter. That represents more than 20% growth from 2018 levels, but it's actually slightly lower at the midpoint from its 2017 mark, indicating that Impinj is only recouping the shortfall from the declining backlog a year ago. Considering that, it's hard to call Impinj a growth stock at this point.
Even worse for investors, Impinj is still operating at a loss, though the company is nearly 20 years old, and that loss is expected to continue at least through the next two years. For the current quarter, Impinj projects an adjusted loss of $6.2 million to $4.7 million, or a loss of $0.29 to $0.22 per share.
In other words, Impinj's current trajectory and its recent history of losses, as well as the temporary decline in revenue, don't bode well for the company's position 10 years from now. Those are all important factors to consider, but a better question for investors wondering about Impinj's status in a decade centers on the future of RFID.
Where RFID is headed
As Impinj's 19-year history indicates, RFID is not a new technology. The technology enables easy and automated tracking of inventory through radio-frequency readers that pick up signals from tags on inventory such as apparel, medical supplies, and auto parts. Impinj's RFID systems read items from a range of 30 feet away to an area of 1,500 square feet.
However, other technologies have advanced since RFID came along that could make it obsolete. For instance, technology like drones, cameras, and artificial intelligence can perform many of the same tasks as RFID. When Amazon (NASDAQ:AMZN) first unveiled its cashierless Go store, investors initially bid Impinj stock higher on rumors that Amazon was using its RFID chips. However, Amazon was instead using a network of cameras and other sensors to detect customers' taking merchandise off the shelves, showing that such a system could serve as a substitute for RFID, at least in that kind of retail environment. Amazon now has 10 Go stores and could have as many as 3,000 stores by 2021, according to Bloomberg.
Similarly, Walmart (NYSE:WMT) has had disappointing results over the years with RFID. Back in 2003, the world's largest retailer asked its 100 biggest suppliers to begin using RFID tags; however, RFID never quite delivered the efficiencies that the retailer hoped for as it didn't always work well and proved to be expensive to tag every individual item. The data it provided was not always useful, either, and Walmart eventually suspended it.
Today, Walmart seems to be more focused on using drones for inventory management in its warehouse and stores.
What it means for Impinj
While RFID is also seeing its own technological advancements, and Impinj is spending aggressively on research and development, it's far from clear that RFID has a sustainable future as competitive technologies have the potential to leapfrog it, and the companies that would be its biggest customers, such as Amazon and Walmart, have turned away from it.
On top of that, Impinj is still a small company, with just $122.6 million in revenue last year, and it continues to lose money. Given the rising competition and its uninspiring record thus far as a publicly traded company, there seems to be a good chance that the company will be in an equally weak position or worse 10 years from now. RFID technology could even be fully obsolete by then.