Shorting IMPINJ Inc After Shares Get Ahead of Themselves

Small cap RFID solutions stock IMPINJ Inc (NASDAQ: PI) is theninth most shorted stock on theNASDAQ with short interest of 42.09% according to IMPINJ Inc wirelessly connects billions of everyday items such as apparel, medical supplies, automobile parts, luggage and food to consumer and business applications such as inventory management, patient safety, asset tracking and item authentication. The Impinj platform uses RAIN RFID to deliver timely information about these items to the digital world, thereby enabling the Internet of Things.

A technical chart for IMPINJ Inc shows shares bouncing lower since June:

IMPINJ Inc began surging in May when Barrons touted the stock as having the potential to rise more than 50% given the versatility of the Companys RFID chips. Shares also rose in the summer after RBCsMitch Steves wrote that the company could be a big beneficiary of Amazon-Whole Foods deal.

However and as the entire market figured out the potential for IMPINJ Inc and RFID, analysts began cutting their ratings. Pacific Crests Brad Erickson wrote in June that the more than doubling of the stock price since March has been an incredible run and the risk and reward trade-offs are now no longer favorable enough to justify buying it:

We are no less positive on the longer-term RFID opportunity; we simply believe investors are now contemplating both the substantial growth opportunities in retail, healthcare, and logistics as well as a healthy impact from partnership announcements from larger players like Amazon or Kaiser. We continue to believe Impinj is the leading player in the RFID secular adoption story, particularly as traditional retailers fight to slow share losses to e-commerce. We maintain that retail alone could be an end market of 60 billion taggable items per year and Amazon could provide a material boost to volumes going forward. Still, given the 44% premium at which Impinj trades relative to its semiconductor peer group, we view the risk/reward as too balanced to maintain our Overweight rating should this upside not materialize.

A lack of share liquidity also brought in the shorts while Impinj Inc beat second analyst estimates across the board, the Company cut its full-year guidance due to delays among large-end customers.And while Q3 revenue that was in line with analysts expectations,there was amiss on the bottom line and theoutlook for revenue and profit to miss consensus for Q4.

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