Opinions
David Fingold
Cognex Corporation
CGNX-Q
BUY
Feb 21, 2018
Stock price when the opinion was issued
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Don't buy now. CGNX is a leader in machine vision, an amazing technology that enables automation. Automation equipment gets installed only when machine tool orders are rising--that's the problem. Those orders are poor now. CGNX has sort of held its revenues given automation in warehousing and the drug industry, but without any major changes in machine tool orders and in making smartphones, it will be hard to grow revenues. Watch CGNX closely, if a 5G iPhone get made in Sept. 2020, and Apple is a customer of Cognex.
They make the eyes on robots used in manufacturing for quality control, with Apple as their #1 customer. But an economic slowdown means less demand for these robots. When rates fall, demand will recover. The dividend grows around 10% annually, but it's tiny. CGNX has little competition. Be patient for this to rebound.
Growth outlook looks very strong in 2024 and 2025. Revenue is expected to grow by around 15% in both years while EPS is expected to grow by 44% in 2024 and 38% in 2025. CGNX is firmly recognized as a leader and one of the top companies in machine vision technology and has been operating in the space for a long time now. CGNX is unique because its sector would be industrials since it manufactures machine vision products, but it would also be a part of the broader technology industry due to the nature of products it is selling.
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This company makes software to determine what a computer is looking at. They own this for their American funds. The company has made great progress in these tools. Demand has been explosive. Revenues have been growing yearly and the prospects are tremendous. There will be continued capital spending and “machine vision” will be a fast growing part of this.