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Why Impinj's Shares Crashed Today

By Anders Bylund - Mar 5, 2020 at 6:50PM

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The RFID expert is a richly valued growth stock with a 20% short-selling cohort. That's a recipe for extreme volatility.

What happened

Shares of Impinj (PI -2.64%) kept sliding lower and lower, all day Thursday. The radio frequency identification (RFID) specialist's stock ended the day 13.3% lower.

So what

Impinj didn't have any news of its own today, but the stock still plunged much faster than the broader market. The S&P 500 index fell 3.3% on coronavirus fears, for example.

This stock tends to amplify whatever trends might be moving the broader markets, often surging or falling much faster than the average stock. Impinj is currently unprofitable, and the stock is richly valued by pretty much any metric you choose. You can pick up shares at the princely valuation ratios of 538 times forward earnings estimates or 604 times trailing free cash flows, for example. More than 20% of Impinj's shares are currently sold short, making the stock even more sensitive to dramatic market swings.

A yellow road sign with the words Volatility Ahead against a dark sky packed with clouds.

Image source: Getty Images.

Now what

On top of Impinj's general volatility, the stock was already sliding lower after Monday's earnings report. The fourth-quarter results were solid, beating Wall Street's expectations across the board, but management expects a revenue slowdown in the second half of 2020 as a large customer shifts over from system installations to actually using the RFID systems. Investors were quick to hit the sell button when Impinj's leadership talked about a "meaningful headwind" starting in the second quarter of 2020.

Impinj is a growth stock for the long run, but the company needs to show nervous investors that it can grow and generate profits in a sustainable way. The results are rocky right now, exposing Impinj investors to a magnified level of volatility. And that's why Impinj shares fell much faster than the rest of the market today.

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Stocks Mentioned

Impinj, Inc. Stock Quote
Impinj, Inc.
$54.54 (-2.64%) $-1.48

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