Cognex Corporation

CGNX Details

Cognex Corporation (NASDAQ: CGNX) is a global manufacturer and distributor of machine vision technologies that enable businesses to automate their manufacturing and distribution processes. It also provides maintenance and support, consultancy, and training. CGNX's key products include machine vision systems and sensors, vision software, and image-based barcode scanners (ID devices).

Latest News:

• Payment of Dividend: On August 05, 2021, CGNX declared a quarterly dividend of USD 0.06 per common share, paid on September 03, 2021, to shareholders of record on August 20, 2021.

H1FY21 Results:

• Significant Growth in Revenue: The company reported a YoY surge of 51.10% in revenues to USD 508.19 million during H1FY21 (ended July 04, 2021) from USD 336.33 million during H1FY20 (ended June 28, 2021), attributable to broad-based recovery from the COVID-19 pandemic.
• Surge in Profitability: CGNX reported a sharp uptick in net income to USD 147.45 million during H1FY21 vs. USD 19.34 million in H1FY20.
• Cash and Debt Position: As of July 04, 2021, the company had cash and cash equivalents (including marketable securities) of USD 407.78 million and no outstanding debt.

Key Risks:

• Customer Concentration Risk: CGNX's top two customers accounted for the majority of its FY20 revenue. As a result, the loss of any of these key customers could hurt the company's financials.
• Competition Risk: CGNX operates in a highly competitive machine vision industry and faces aggressive price competition from its significant players, which could cause pricing pressure for the company. Should this trend continue, it could harm the financials of the company.

Outlook:

• Revenue Estimate: As of Q2FY21, CGNX expects its Q3FY21 revenues to range between USD 275 – 295 million, along with a gross margin of low to mid 70% range.
• Operating Expenses: Operating expenses for the next quarter are also expected to grow in mid-single digits on a sequential basis due to increasing sales activities and investments in engineering and sales, support for large deployments of Cognex technologies, and planned product launches.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CGNX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CGNX's stock price rose 5.42% in the past three months and is currently leaning towards the mid-band of the 52-week range of USD 62.55 to USD 101.82. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 57.56. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 96.14.

Considering the company's growth prospects, solid margins, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 85.71, up 1.54% as of October 18, 2021, 12:05 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.  

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