Impinj trading nicely higher on Q4 upside guidance; investors are clearly relieved
10:09 AM ET 1/17/24 | Briefing.com
Impinj ( PI +8%) is making a big move today after providing upside revenue guidance. This provider of RAIN RFID chips now expects Q4 revs to exceed $70 mln, nicely above its $65.5-68.5 mln prior guidance. Impinj helps companies track products through the supply chain as its chips are smaller than a grain of sand. Unlike a barcode, its chips can be read up to 30 feet away without line of sight at speeds of up to 1,000 items per second.
With retail apparel being its largest end market by far (67-75% of revs historically), we think investors had some nervousness going into PI's Q4 report (full results to be reported on Feb 8 after the close). Consumers are focusing more on essential needs and less on discretionary items, which includes apparel. Also, the supply chain for retail apparel has improved a lot since last year. As such, they need not stock as much inventory, they can order product when they need it and feel more confident it will arrive. A good example is Abercrombie (ANF), which has said its "chase" strategy has returned, allowing it to quickly adapt to changing fashion trends. Impinj did not offer a lot of detail this morning as to why it is guiding for upside. However, at an investor conference in November, the company did explain that it has been going through some inventory destocking around endpoint ICs. At the time it said, it had made mixed progress in Q3, with some partners on track or ahead of schedule and some behind. It also said it expected to make further progress in Q4 and that its larger partners could end the year reasonably healthy. Something that stood out to us from that conference was Impinj saying it is starting to see some green shoots in the macro data. Specifically, retail import data, which is a measure of production for Impinj, has improved for the last six months. PI was still down 10-20% yr/yr but that was much better than the down 30-40% it was dealing with at the beginning of 2023. PI saw the US market as stabilizing with Europe maybe a quarter or two behind with Asia more mixed.Overall, investors are clearly relieved to see the upside Q4 guidance given some of the macro headwinds in the retail apparel space. Also, this guidance makes us think Impinj's inventory destocking headwind seems to be easing. After guiding down a couple of times earlier in the year, the company seems to be turning a quarter as it heads into 2024.
Looking further out, Impinj has made expansion into general merchandise, which is massive, a key priority. Unfortunately, the rollout has gone slower than expected as Impinj has been seeing a steeper learning curve among suppliers outside of apparel, which have been deploying for 10 years. The company explains that many suppliers in the general merchandise space (toys, electronics, stationery etc.) are tagging items for the first time. However, Impinj is working to get these suppliers up and running. |
