Imping today
(As of 11/20/2024 ET)
- 52 week range
- $78.17
▼
$239.88
- P/E ratio
- 208.92
- Target price
- $224.60
Demon NASDAQ:PI is a mid-cap chip stock that quietly had a good year in 2024. The company’s shares rose 93%, placing it among the top five performing semiconductor stocks in the United States. Wall Street analysts remain bullish on the stock. The average of seven price targets tracked by MarketBeat for October is $246 per share. This implies 40% upside potential for the stock from current levels.
So, what exactly does Impinj do and why has the market driven up the value of this company so much in 2024? I will answer this question and share my long-term view of the opportunity that Impinj has.
Impinj: Helping Companies Level Up Their Tracking Capabilities
Impinj specializes in so-called “product visualization solutions.” Impinj allows companies to track their inventory by embedding small chips into their products. This allows for better inventory management and can help reduce counterfeiting and theft in retail. Impinj manufactures two types of integrated circuits (ICs), another name for a chip or semiconductor. The former is the endpoint IC and the latter is the reader IC.
Endpoint chips are small chips embedded in a product’s packaging. They use radio frequency identification (RFID) technology to communicate with reader chips. Readers send radio signals that connect to endpoint chips. The system transmits unique information in each endpoint chip back to the reader. This allows you to track the exact location of each embedded element.
The company breaks down revenue based on chips and endpoint systems. The systems include reader chips and other associated hardware and software. The revenue split between them has consistently been around 75% for endpoint chips and 25% for systems.
Impinj: revenue growth and profitability improvement
Impinj beat 2024 sales and profit forecasts. After it released its first-quarter earnings on April 24, the stock rose nearly 29% in one day. However, the company’s latest report sent shares down 14%. This is despite the company beating both sales and earnings and raising its guidance above expectations.
Impinj stock forecast today
$224.60
Growth potential 20.79%Moderate purchase
Based on 10 analyst ratings
| High forecast | $270.00 |
|---|---|
| Average forecast | $224.60 |
| Low forecast | US$150.00 |
Impinj stock forecast details
Revenue grew strongly in the second quarter by 19% and grew by 46% in the third quarter. Profitability has also increased significantly. The company’s operating margin was 9% in the second quarter and only slightly negative in the third quarter after several quarters in which it was deeply negative.
Overall, the stock appears to be up for the year on positive sentiment regarding the market opportunity available for the product. Impinj seems to have established itself as one of the leaders in silicon-based item tracking. Another large company in this area is Zebra Technologies. NASDAQ: ZBRA. However, its business is more diversified and less focused on implementing RFID technology on every product in a store or warehouse. NHP Semiconductor NASDAQ: NXPI also competes in space.
The untapped potential of Impinj is huge
The technology Impinj is selling is certainly something to be excited about. RFID tracking offers many advantages over traditional tracking methods such as barcodes. For example, instead of a barcode scanner requiring line of sight to the barcode, the reader chip simply needs to be within 10 meters of the endpoint chip to detect it. In addition, it can very quickly collect information from many endpoint chips, exchanging data up to 1000 of them per second.
The market opportunity for Impinj is huge. Companies need some way to track trillions of products a year. Every item in the store is tracked by barcode, and the same applies to every parcel. The benefits of Impinj’s technology suggest that it can take on these use cases. The firm describes its IC terminal devices as costing “pennies.” This means they are fairly cheap, but will never be as cheap as barcodes, which cost next to nothing. RFID tags probably won’t make sense for tracking all products, but Impinj still has huge room for expansion.
One example is the new European Union (EU) law on digital product passports. This requires all products sold in the EU to have a digital copy to track them. The goal is to track products throughout their life cycle to improve sustainability. In 2027, this regulation will come into force for textiles. Impinj’s capabilities will make it ideal for retailers to comply with this rule. This alone represents billions of objects that can use Impinj endpoint chips.
Overall, Impinj looks very expensive with a forward P/E ratio of 68x. But to me, this price makes sense when you think about the huge market opportunity this company has.
You might want to hear this before you consider Impinj.
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