Shares of Impinj (NASDAQ: PI) gained 11.5% in June, according to data from S&P Global Market Intelligence.
The radio frequency ID (RFID) solutions specialist saw shares rise quietly through the first week of June, but then they crashed hard as investors basically lost patience with lofty valuations on tech stocks for a moment. That damage was more than healed by the news that major client Amazon.com is buying Whole Foods Market, as Impinj investors envisioned boatloads of RFID chips rolling into Whole Foods stores when that deal closes. And if that weren't enough excitement for one month, Impinj then lost some of those gains when another analyst pointed out that the stock looks expensive.
Them's the breaks when you invest in companies with short market histories and a lack of dependable profits upon which investors can build a solid valuation model. Impinj shares are trading at 99 times forward earnings and roughly 430 times trailing EBITDA profits, and both free cash flow and bottom-line earnings are negative right now.
That doesn't take away from the fact that Impinj plays a leading role in an explosive RFID market, and its prospects seem bright. But nobody really knows what the stock should be worth right now, which explains why shares have managed to gain 184% in less than a year on the public market -- with several single-day drops of at least 10% along the way. The volatility will likely continue until Impinj starts to produce sustainable profits of some sort.
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John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of AMZN. The Motley Fool owns shares of and recommends AMZN and WFM. The Motley Fool recommends Impinj. The Motley Fool has a disclosure policy.