What happened
Shares of item-tracking technology company Impinj (PI -4.45%) plunged on Wednesday, down roughly 9.5% as of 3:00 PM EDT.
While much of the focus was on the Federal Reserve meeting today, Impinj fell meaningfully more than the average stock. This was likely due to investors digesting the company's Investor Day presentation after market close yesterday, in which management laid out its longer-term model. Given the stock's high valuation, it had a high bar to clear, and apparently investors were somewhat disappointed.
So what
It's a bit difficult to know exactly what investors had a problem with in Impinj's presentation. Likely, it was the Chief Financial Officer's longer-term financial model that did the stock in today.
Going forward, management sees a longer-term revenue run-rate between $500 million and $750 million annually, up from $257.8 million in 2022. Moreover, management sees gross margins just slightly higher than last year's 55.5%, along with an adjusted EBITDA range between 19% and 25%.
That may have underwhelmed investors. After all, even taking the high end of those projections, and one would end up with $187 million in EBITDA over the longer-term, which is likely a few years out. Today, Impinj has a market cap of $2.75 billion and an enterprise value slightly higher than that, even after today's drop. That implies an EV-to-EBITDA ratio around 15, which is somewhat high for a more mature company.
Impinj had nearly doubled its revenue over just the past two years, and grew at a robust 61.6% last quarter along with significant margin improvement. Therefore, investors may very well have been expecting more growth and margin expansion over the longer-term. Having more than doubled over the past year and trading at a healthy 10 times sales heading into yesterday, it's perhaps not surprising to see investors taking profits in the stock after the conservative forecast.
PI PS Ratio data by YCharts
Now what
Impinj is an intriguing growth stock, as it has leadership in an area of automating the tracking of physical objects, an area that seems assured to grow over the long-term.
Still, the stock's strong performance in recent years has led to a high valuation. With the Federal Reserve today implying it may in fact do more interest rate hikes later this year, high-growth stocks with little profits have a higher and higher bar to clear to keep impressing investors.
