What Happened:
Shares of RFID manufacturer Impinj (NASDAQ:PI) jumped 11% in the morning session after the S&P Dow Jones Indices announced that the company would be added to the S&P SmallCap 600 index before the opening of trading on Monday, September 23, 2024. Being included in the index means that Impinj will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock.
We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
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What is the market telling us:
Impinj’s shares are very volatile and over the last year have had 25 moves greater than 5%. But moves this big are very rare even for Impinj and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was 11 months ago, when the stock gained 18.7% on the news that the company reported an impressive "beat and raise" quarter. Third quarter revenue exceeded Wall Street's estimates by a small magnitude, while EPS blew past analysts' expectations. Next quarter's revenue guidance was raised and came in higher than Wall Street's estimates. In fact, the full year outlook for all major line items was raised and came in above Consensus.
In the release, the company said that it is seeing "early signs of retail demand improvement, strong ongoing endpoint IC unit-volume growth despite the downturn and remain optimistic for the future." On the other hand, its gross and operating margin shrunk. Overall, it was a strong quarter for the company.
Impinj is up 101% since the beginning of the year, and at $173.16 per share it is trading close to its 52-week high of $181.50 from July 2024. Investors who bought $1,000 worth of Impinj’s shares 5 years ago would now be looking at an investment worth $5,231.
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