Upgrading Impinj to Buy: Improving Growth Outlook From Key Customer & Attractive Valuation
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Key Takeaway: We are upgrading Impinj PI 0.00%↑ from Hold to Buy ahead of their 4Q24 earnings report, which is slated for Wednesday, February 5th after market close, as we believe shares look more attractive following a ~45% decline since Q3 earnings. At the time, we highlighted that shares appeared priced for flawless execution, and the subsequent sell-off suggests investor concerns aligned with our view. Notably, Impinj already reiterated its 4Q24 guidance when it preannounced in early January, but as we disclosed in a prior note, investors were likely disappointed given the company’s historical beat-and-raise pattern and shares have further traded down. That said, our positive change in sentiment is largely driven by a more upbeat outlook from key customer Avery Dennison, which purchases RAIN RFID chips for its RFID labels and accounted for ~33% of Impinj’s total sales in 2023. Avery Dennison on their 4Q24 earnings call guided to an acceleration in revenue growth for 2025 in its Intelligent Labels segment, signaling a stronger demand environment for Impinj’s products.
Company Overview
As a quick refresher, Impinj is a leading provider of radio-frequency identification (RFID) solutions that provide item intelligence and connectivity for retailers, supply chain and logistic (SC&L) operators and a number of emerging industries. Impinj's solution connects everyday items to the internet using a form of RFID known as RAIN, which was developed by the company’s current CEO. With this, businesses can identify, locate, authenticate and engage each item, which over time has significantly improved inventory management, asset tracking and overall operational efficiencies. Impinj sells an entire platform, which includes endpoint integrated circuits (ICs) to apply to items, getaway radio ICs and finished getaways that communicate with the tagged ICs, as well as software to extract item intelligence from the tag data. Impinj generates ~75% of revenues through the sales of endpoint IC where OEM partners attach an endpoint IC to a printed or etched antenna on a paper then cover the composite inlay with a paper face to form a tag and is attached to items in retail, SC&L, healthcare, automotive, industrial and manufacturing, and many more products. Impinj has sold more than 95 billion endpoint ICs since inception, and global enterprises such as Walmart, UBS and Target have deployed Impinj’s IoT platform. Impinj fulfills via a board and established global ecosystem of solution providers, system integrators and distributors, but ~44% of sales in 2023 were sold to tag manufacturers Avery Dennison (33%) and Arizon (11%).
Below is an overview video of Impinj’s RAIN RFID solution.
In the sections below, we dive deeper into our new bullish thesis, updated five-year outlook, and revised price target.