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Bull of the Day: Impinj (PI)

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Impinj (PI - Free Report) is a $700 million provider of radio frequency identification (RFID) sensors to retail, pharmaceutical, healthcare, food and beverage, manufacturing, transportation, sports and banking industries. Impinj offers the only integrated RAIN RFID platform spanning endpoints, connectivity, and software.
 
Their end-to-end Internet of Things platform solutions connect the physical and digital worlds, helping companies like Coke and Cisco and institutions like the University of Tennessee Medical Center and the U.S. Patent and Trademark Office manage identity, location and authenticity of devices, products, inventory and apps.
 
Impinj helps businesses and people analyze, optimize, and innovate by wirelessly connecting billions of everyday things -- such as apparel, automobile parts, luggage, and shipments -- to the Internet. The Impinj platform uses RAIN RFID to deliver timely data about these everyday things to business and consumer applications, enabling an information-rich IoT that can improve supply chain logistics.
 
RAIN will be a key part of the IoT's growth from billions to trillions of connected devices. The word RAIN -- an acronym derived from RAdio frequency IdentificatioN -- is intended as a nod to the link between UHF RFID and the cloud, where RFID-based data can be stored, managed and shared via the Internet.
 
A RAIN RFID solution uses a reader to read and write a tagged item, manage the data and take action. More on this technology and its uses coming up.
 
Company Growth Outlook
 
Impinj has a big retail "brick-n-mortar" business (mostly apparel) that has put a dent in their growth this year. But it looks like the worst may be behind as they adapt into other areas like healthcare and facilities/inventory management.
 
At a $700 million market cap with projected revenues of $168M next year (15% growth), the stock trades at just 4X sales. Whereas their giant $22 billion peer Skyworks (SWKS - Free Report) , with a big mobile handset business, trades at 6.5X sales growing at only 9% next year after a 7% slide this year.
 
Impinj did have a bigger slip in EPS this year, with the 2020 profit consensus dropping to -51 cents from +4 cents last year. But estimates have stabilized and the path to return to profitability is in view next year.
 
And despite the earnings wipeout this year, the company still seems to surprise to the upside with an avg 450% beat the last 4 quarters.
 
I recently bought PI for its emerging role in the IoT market and its attractive growth/valuation metrics. I think they also sit at a unique juncture between Blockchain and Cybersecurity industry needs. I will be researching this potential more.
 
The company reports next week on July 29, so I look forward to an improved outlook for the second half. But if they disappoint, I would add more shares inside the $25-27 support zone that formed during the May-June consolidation before pushing new 5-month highs above $31 this month.
 
Rising Analyst Views
 
Piper Sandler analyst Harsh Kumar raised the firm's price target on Impinj to $35 from $29 and reiterates an Overweight rating on the shares after taking over coverage of the name. The analyst views Impinj as a market leader in RAIN enabled connectivity as the market grows from "billions to trillions of items connected per year." 
 
Kumar says the company is a leader in Internet of Things applications, with one of the most complete packages of systems and sensors.
 
Needham analyst James Ricchiuti raised the firm's price target on Impinj to $34 from $25 and keeps a Buy rating on the shares. The analyst is cutting his FY20 and FY21 EPS views to (39c) from (7c) and to (11c) from 0c respectively, reflecting the slow opening of brick-and-mortar retail and continued challenging demand environment amid the persistent COVID-19 "crisis" for apparel retail.
 
Longer term however, Ricchiuti sees the pace of RFID adoption by retailers as being likely to accelerate in the aftermath of COVID-19, with brick-and-mortar retailers investing in new technologies enabling omni-channel and ship-from-store capabilities. As the "only pure-play in the RFID industry", the analyst sees Impinj as benefiting from the growing investment trend.
 
These estimate moves were already incorporated in the Zacks Rank over 60 days ago and thus not a factor now.
 
Impinj and the Expanding, Dynamic IoT
 
Here are more descriptions of the company and business from their website...
 
Organizations around the world use the Impinj platform to connect items to applications, enabling the Internet of Things. By connecting everyday items to applications, companies can improve efficiencies, increase sales, and delight customers. 
 
Impinj operates a platform that enables wireless connectivity for everyday items by delivering each item's unique identity, location, and authenticity to business and consumer applications. Its integrated platform connects everyday items to applications, delivering real-time information to businesses about items they create, manage, transport, and sell.
 
The company's platform includes endpoint integrated circuits (ICs), a miniature radios-on-a-chip, which attach-to and identify their host items; and connectivity layer that comprises reader ICs and modules, readers, and gateways to wirelessly identify, locate, authenticate, and engage items, as well as provide power to and communicate bidirectionally with endpoint ICs. 
 
Its platform also consists of software layer that comprises ItemSense, a distributed operating system for its platform. The company primarily serves retail, supply chain and logistics, aviation, automotive, healthcare, industrial and manufacturing, sports, food, datacenter, travel, banking, and linen and uniform tracking sectors through distributors, system integrators, value-added resellers, and software solution partners in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. Impinj, Inc. was founded in 2000 and is headquartered in Seattle, Washington.
 
RAIN RFID is a passive (battery-free) wireless technology system that connects billions of everyday items to the Internet, enabling businesses and consumers to identify, locate, authenticate and engage each item. RAIN RFID is used in a wide variety of applications, including inventory management, patient safety, asset tracking and item authentication.
 
RAIN is the fastest growing segment of the RFID market and uses a single, global standard: UHF Gen 2 (ISO/IEC 18000-63). RAIN has connected over 20 billion items to date. By providing internet connectivity to and real time information about everyday items such as apparel, medical supplies, automobile parts, food and more, RAIN RFID enables the true Internet of Things.
 
Bottom line on PI: Growing revenues at 15% next year and trading only 4X those sales in a key IoT industry makes this small-cap a buy under a $700 million market-cap.
 
The Hottest Tech Mega-Trend of All
 
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
 

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