IMPINJ (Nasdaq: PI)

10/24/2016

IMPINj LOGO

Ticker: PI
Stock Price: $26.80
52-Week High: $38.43
52-Week Low: $16.36
Market Cap: $503.20M

Impinj is the leader in ultra-high frequency (UHF) radio-frequency identification (RFID), which allows for individual tagging of items, principally for the retail and health care verticals, but also in industrial, automotive, data center, food and banking markets. The company provides wireless connectivity for everyday items and to deliver, to the digital world, each item's unique identity, location and authenticity. The Impinj platform connects billions of everyday items such as apparel, medical supplies, automobile parts, drivers licenses, food and luggage to applications such as inventory management, patient safety, asset tracking and item authentication, delivering real-time information to businesses about items they create, manage, transport, and sell.

Very favorable secular trends. The rise of mobility and online shopping has put brick-and-mortar retailers at a disadvantage to e-commerce vendors. Impinj, with a patented, end-to-end solution, is well positioned, to provide a key enabling technology that allows retailers to expose their entire inventory to online and offline channels while delivering a host of other cost and capital efficiencies. This area is a clear hotspot for growth.

Revenue opportunity is big. The company has the technology and the necessary scale and future roadmap to sustain at least 25% growth over the next several years, with improving leverage. According to the company's S-1, Impinj sees the retail and health care total addressable markets growing by 39% and 14% CAGRs from 2014 to 2020 with both exceeding $5 billion by 2020.

Volume growth substantial. Not only are the numbers of tagged items large and growing, but so is the infrastructure, in both scale and investment, that produces, encodes, applies, reads and extracts business value from these tagged items. According to industry research, RAIN tag IC volumes grew at a 27% compound annual growth rate, or CAGR, from 2010 to 2015, reaching 5.3 billion in 2015 and are expected to grow to over 20 billion in 2020. The chart below shows yearly worldwide RAIN tag IC sales volumes and Impinj's yearly tag IC shipments in billions.

Impinj Sales

Conclusion:

We see a good future ahead for Impinj as the leader in item-level RFID tagging and reading. Impinj is playing directly into retailers' needs to invest in omnichannel strategies. Revenue growth is likely to run above 25% this year and next. Profitability is around the corner as analysts see profit coming in 2017. We would buy the stock and see upside to $30.