For Immediate Release
Chicago, IL – July 24, 2020 – Zacks Equity Research Shares of Impinj, Inc. PI as the Bull of the Day, Penumbra, Inc. PEN as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Microsoft Corporation MSFT, Apple Inc. AAPL and Amazon.com, Inc. AMZN.
Here is a synopsis of all five stocks:
Bull of the Day:
Impinj 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, 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.
Bear of the Day:
Penumbra is a $7 billion medical technology company specializing in minimally-invasive instruments for neurovascular and peripheral vascular diseases.
The company leverages its expertise in catheter-based technology to develop access devices for treating strokes, aneurysms, deep vein thrombosis, pulmonary embolism, and other patient events caused by blood clots.
I last wrote about Penumbra as the Bull of the Day in early April when shares were trading near $160. They since rallied to new all-time highs this week above $210, after a welcome breakout for bulls above $195.
One of the catalysts was from Citi analyst Joanne Wuensch who raised the firm's price target on Penumbra to $214 from $192 following the company's Q1 results on May 7.
But now I have to make PEN the Bear of the Day because EPS estimates have been slashed as hospitals are under new pressures from the COVID-19 pandemic and many surgical procedures are being delayed.
In the past 60 days, the full-year 2020 EPS consensus dropped from +20 cents to -9 cents, representing a 109% annual collapse. And next year's Zacks consensus was slashed 23% from $1.51 to $1.16.
Medical Instrument Innovators to the Rescue
Penumbra takes its name from the shadow-like effect in pathology and anatomy where the area surrounding an ischemic event such as thrombotic or embolic stroke can become dark. Immediately following the event, blood flow and therefore oxygen transport is reduced locally, leading to hypoxia of the cells near the location of the original insult.
Based in Alameda, CA, Penumbra sells its products to hospitals and clinics primarily through its direct sales organization in the United States, most of Europe, Canada and Australia, and through distributors in select international markets. Sales are expected to grow 16% this year to cross $635 million.
I have a special interest in medical technology stocks with innovative devices and instruments. In my Healthcare Innovators portfolio, we have owned another fascinating and successful company making use of catheter technologies to replace heart valves, Edwards Lifesciences.
Buy PEN Under 10X Sales Every Time
I have actually written about Penumbra as the Bull of the Day several times since 2018, reminding investors that they could pay up to 10 times sales for this precision neuro-innovator as it should be on the shopping lists of J&J, Medtronic or Abbott at this valuation.
There have been several round trips between $130 and $180 to take advantage of. Even with another great quarterly report on Feb 25, the coronavirus crash took shares back down into my buy zone with a panic-driven spike through $125.
Now with shares coming off ATH above $210, investors should be taking profits and then be patient for a re-entry. This year's top line is expected to fall 2.36% to $535 million.
But analysts are keeping next year's revenue consensus just under $700 million, representing a 29% growth advance. That will make PEN a buy again soon, maybe at the $185-190 breakout level.
For now, keep your eye on those EPS estimates to see that they stop going down and stabilize. The Zacks Rank will let you know.
Are Tech Stocks in Trouble This Earnings Season?
Microsoft beat big on top and bottom-line estimates, far exceeding analysts' expectations, yet the stock fell over 2%. This innovation-driven enterprise has been provided with a strong pandemic tailwind with its cloud-oriented business model experiencing robust demand growth through this medically induced economic coma. So why did the stock fall, and what does this mean for the rest of big tech?
Why MSFT Sold After Earnings Beat
Microsoft is notorious for under-promising and overdelivering, surpassing analysts' EPS and sales estimates for 15 consecutive quarters. Analysts this quarter have been exceptionally conservative with their predictions because of the extreme amount of uncertainty, setting MSFT for another ostensibly fruitful earning release.
Institutional investors were aware of this and had already priced in an earnings beat. Now that they saw what they wanted from Microsoft's quarterly report, investors are ready to reallocate their capital into some of this past quarter's cyclical underperformers.
What This Means For The Rest Of Big Tech
Microsoft had 66% growth from its March lows to its July highs, and investors are still getting wary about its lofty valuation. Apple and Amazon both over doubled their share price in that time frame, pushing their stocks to valuations that were even frothier than MSFT. An earnings beat may not be enough for big tech to sustain its seemingly overzealous valuations through earnings season.
Tech's parabolic returns over the past quarter have to peak at some point. What better time for that to happen than earning season when investors are reassessing their portfolio risk/reward ratio and sector allocations.
Obviously, nothing is guaranteed in this crazy, unpredictable market, but I am hedging my tech-heavy portfolio with some August 21st expiring QQQ puts.
It may not be a bad idea to rotate some of your big tech profits into underperforming cyclical sectors such as high yielding utilities, or REITs, which offer an opportunity for capital growth and sustainable quarterly dividends as the economy recovers.
Tech isn't a safe-haven amid this highly uncertain earnings season. Tech stocks prolific returns have to hit a peak at some point and what better time than mid-year earnings. Be careful with stock purchases over the next month and consider rotating some profits into underperforming cyclical names.
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.
See Zacks' 3 Best Stocks to Play This Trend >>
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