Why Impinj Stock Plunged Today

What happened

Shares of Impinj (NASDAQ: PI) were tumbling today after the maker of RFID chips offered disappointing guidance in its first-quarter earnings report last night.

As of 9:57 a.m. ET, the stock was down 30.7%.

So what

Impinj, which makes RAIN RFID (radio frequency ID) tags for retailers, logistics companies, and other businesses that need to track their inventory, posted solid top-line growth in the first quarter. Revenue soared 62% to $85.9 million, which beat estimates for $83.6 million.

Gross margin in the quarter fell from 54.1% to 50.7%, but overall profitability improved. The company posted adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $8.6 million, and adjusted earnings per share jumped from $0.09 to $0.30, but that was still below consensus estimates for $0.33.

CEO Chris Diorio said, "Our first-quarter results were solid, with record revenue and a very strong multi-quarter endpoint IC backlog. With confidence in our platform solutions and the secular market growth, we are well positioned to capitalize on our opportunity."

Now what

Second-quarter guidance seemed to be the sticking point for investors. Management forecast revenue of $84 million to $87 million, up 43% from the prior-year period, but below the consensus at $88.3 million.

Its bottom-line forecast also missed the mark; Impinj called for adjusted EPS of $0.28-$0.33, up from $0.11 in the quarter a year ago, but below analysts' expectations at $0.41.

The disappointing guidance seems to reflect a delay in some deployments, and investors should be encouraged by commentary about its backlog. However, the stock is expensive, and high-priced stocks tend to get punished by the market whenever management's forecast falls short.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Impinj. The Motley Fool has a disclosure policy.