What happened Shares of Impinj (NASDAQ: PI) fell as much as 12.4% on Thursday morning, following a strong third-quarter earnings report with a side of conservative next-quarter bottom-line guidance. By noon EDT, the stock had recovered to a 6.4% drop. So what The maker of radio frequency identification (RFID) tags and devices saw third-quarter sales fall 31% year over year to $28.2 million. On the bottom line, Impinj swung from $0.08 of diluted earnings to a non-GAAP net loss of $0.29 per share. Your average Wall Street analyst would have settled for a deeper loss of $0.32 per share on sales near $24.7 million. The midpoint of Impinj's guidance for the fourth quarter stopped at a net loss of roughly $0.37 per share on revenues near $27.5 million. Here, analysts had been looking for a loss of roughly $0.25 per share on top-line sales in the vicinity of $24.7 million. The negative market reaction today stemmed from this modest earnings guidance. Image source: Impinj. Now what The company shipped more than 100 million of the recently introduced M700 RFID endpoints in the third quarter. These advanced and more profitable endpoint tags should drive Impinj's profit margins higher over time. However, the M700 product line won't simply replace older models right away, resulting in a more customer-friendly price increase and a more complicated financial model. "I would expect gross margin to start improving in 2021. Now keep in mind that for that improvement we have to increase our mix of the M700 and when we introduce a new IC it's typically not a replacement -- think of it as a layering effect," CFO Cary Baker said on the earnings call. Shipping volumes are normalizing after a difficult spring and summer in the clothing retail and automotive industries. The future remains cloudy due to uncertainty related to the COVID-19 pandemic, which inspired a conservative slate of fourth-quarter estimates. 10 stocks we like better than ImpinjWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Impinj wasn't one of them! That's right -- they think these 10 stocks are even better buys. See the 10 stocks *Stock Advisor returns as of October 20, 2020 Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Impinj. The Motley Fool has a disclosure policy.Source