Shares of Impinj (PI 6.13%) were soaring this week after the maker of radio-frequency ID (RFID) chips and related tracking systems posted better-than-expected results in its third-quarter earnings report. The results also reassured investors after the company posted disappointing numbers earlier in the year.
According to data from S&P Global Market Intelligence, the stock was up 31.7% for the week through 2:10 p.m. ET on Thursday.
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Impinj jumps over a low bar
In its third-quarter earnings report last night, the company acknowledged that it continues to face macroeconomic headwinds, but it still beat estimates.
Revenue in the quarter fell 5% to $65 million, which edged out expectations at $64.8 million. However, gross margin dropped sharply in the quarter from 54.8% to 47.3%. Adjusted gross margin was slightly better at 50.5%, but that was down from 56.9% in the quarter a year ago. A falling gross margin indicates that input costs are rising, prices are falling, or both.
Further down the income statement, operating expenses rose 19% to $46.6 million, and the company reported a generally accepted accounting principles (GAAP) operating loss of $15.8 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from $9.8 million in the quarter a year ago to $0.3 million, and its adjusted profit per share was breakeven, down from $0.31 a year ago. That result topped estimates of a loss of $0.10 per share.
CEO Chris Diorio expressed optimism, saying profitability exceeded the company's expectations. He added: "While macroeconomic pressures continue to impact our fourth-quarter outlook, we believe our long-term opportunity remains intact. We see early signs of retail demand improvement, strong ongoing endpoint IC unit-volume growth despite the downturn, and remain optimistic for the future."
NASDAQ: PI
Key Data Points
When will the business recover?
Impinj's fourth-quarter guidance called for continuing weakness with the company forecasting revenue of $65.5 million to $68.5 million, down from 12% in the quarter a year ago. It also sees adjusted EBITDA around breakeven.
The company seems to be impacted by the slowdown in the retail sector and as retailers reduce their inventories.
Two Wall Street analysts reiterated buy ratings on the stock but lowered price targets, saying that low expectations had been baked into the stock price.
It's odd to see a stock rally on weak quarterly results, but Impinj has long been volatile and exposed to cyclical factors in its customers' industries. Keep an eye on the retail sector for some insight into when the business might start to bounce back.
