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Impinj

Gen2X Launch Will Drive RAIN System Demand, But Supply Chain Issues May Impact Profits

AN
Consensus Narrative from 8 Analysts
Published
31 Aug 24
Updated
19 Mar 25
Share
AnalystConsensusTarget's Fair Value
US$141.38
35.2% undervalued intrinsic discount
19 Mar
US$91.62
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1Y
-27.6%
7D
0.2%

Author's Valuation

US$141.4

35.2% undervalued intrinsic discount

Analyst Price Target Fair Value

Key Takeaways

  • Launch of Gen2X may boost revenue through increased demand and improved gross margins due to cost-effective design.
  • Strategic opportunities in retail and supply chain sectors are expected to drive sustained revenue and earnings growth.
  • Impinj faces geopolitical and market challenges that could disrupt supply chains, compress prices, and lead to revenue stagnation and lower profitability.

Catalysts

About Impinj
    Operates a cloud connectivity platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa.
What are the underlying business or industry changes driving this perspective?
  • The launch of Gen2X, which enhances the performance and security of RAIN systems, could drive increased demand from enterprise customers, potentially boosting revenue and improving gross margins due to its more cost-effective design.
  • Engagements with large grocery chains exploring item-level food tagging present significant future growth opportunities, which could expand revenue as these projects potentially ramp in 2026.
  • Expansion in retail apparel and general merchandise, along with ongoing and new opportunities in supply chain and logistics, are expected to sustain label demand growth and contribute to revenue and earnings over time.
  • The focus on accelerating the adoption of the M800, which has lower ASPs but also lower production costs, could improve gross margins once it becomes a larger part of the product mix.
  • Short-term inventory challenges and demand fluctuations are being actively managed, potentially setting the stage for operating margin recovery and profitability improvement as the company regains momentum.

Impinj Earnings and Revenue Growth

Impinj Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Impinj's revenue will grow by 14.3% annually over the next 3 years.
  • Analysts assume that profit margins will shrink from 11.2% today to 9.6% in 3 years time.
  • Analysts expect earnings to reach $52.5 million (and earnings per share of $0.61) by about March 2028, up from $40.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $60 million in earnings, and the most bearish expecting $45 million.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 107.7x on those 2028 earnings, up from 63.9x today. This future PE is greater than the current PE for the US Semiconductor industry at 29.4x.
  • Analysts expect the number of shares outstanding to grow by 2.98% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 8.85%, as per the Simply Wall St company report.

Impinj Future Earnings Per Share Growth

Impinj Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Impinj faces geopolitical uncertainty and tariffs, which could disrupt supply chains and sourcing decisions, potentially impacting revenue and profit margins.
  • The company reports disruptions from aggressive price shopping for labels, which could compress prices and affect their revenue and margins.
  • Impinj is experiencing a seasonal and unexpected decline in endpoint IC revenue due to partners having excess inventory, which may lead to a short-term decrease in revenue and earnings.
  • The pipeline for new large program ramps is described as being in a lull, with no significant new ramps expected in the first half of 2025, suggesting potential stagnation in revenue growth during that period.
  • Impinj is dealing with changes in demand and market dynamics in logistics, alongside competitive pressures in the bonding market, which could lead to sustained periods of lower revenue and profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of $141.375 for Impinj based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $160.0, and the most bearish reporting a price target of just $129.0.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $546.9 million, earnings will come to $52.5 million, and it would be trading on a PE ratio of 107.7x, assuming you use a discount rate of 8.9%.
  • Given the current share price of $91.46, the analyst price target of $141.38 is 35.3% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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