Cognex Corporation

CGNX Details

Cognex Corporation (NASDAQ: CGNX) is a prominent global manufacturer and distributor of machine vision products that aid in automating the manufacturing and distribution operations of enterprises. Customers can also get maintenance and support, consultancy, and training from CGNX. The company sells its products in various geographic locations such as the United States, Europe, Greater China, and other Asian countries. Machine vision systems and sensors, vision software, and image-based barcode readers (ID products) are among CGNX’s key products.

New Launches: On July 28, 2021, CGNX announced the debut of its Vision software - VisionPro 10.0 and VisionPro Deep Learning 2.0. VisionPro 10.0 enhances program speed while also simplifying application setup. VisionPro Deep Learning 2.0 is designed to function in tandem with VisionPro 10.0, allowing users to employ both deep learning and traditional vision technologies in the same application.

On July 26, 2021, CGNX launched the High-Speed Steerable Mirror, a patented technology developed for use with the DataMan 470 barcode scanner that allows the broad field of view applications with a single compact device. It expands the field of view of the DataMan barcode reader both vertically and horizontally by providing an effective resolution to 3MP and 5MP.

Strong 6MFY21 Results: The company reported a sharp uptick of 51.10% in revenues to USD 508.18 million during 6MFY21 (ended July 04, 2021) compared to USD 336.33 million during 6MFY20 (ended June 28, 2021), primarily due to broad-based recovery from the COVID-19 pandemic. In addition, CGNX reported a sharp increase in net income to USD 147.45 million during 6MFY21 compared to USD 19.34 million during 6MFY20. As of June 30, 2021, its cash and cash equivalents (including marketable securities) were USD 407.80 million, with no outstanding debt.

Key Risks: CGNX has two large customers; each represented a significant portion of revenue and accounted receivable as of FY20. Excessive dependence on certain customers for business could hurt the company’s financial health in the future. Furthermore, a significant portion of its products is manufactured by a third-party contractor located in Indonesia. The failure of a major supplier can affect the timely supply of components for the company’s products, thus hurting its operating performance and cash flows.

Outlook: For Q3FY21, CGNX expects its revenues between USD 275 to USD 295 million, with a gross margin in the low to mid 70% range. In addition, the company expects its operating expenses to be up by mid-single digits due to investments in engineering and sales, support of large deployments of Cognex products and upcoming product launches, and increased sales activities.

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 stock price rose 25.38% in the past twelve months and is currently leaning towards the mid-band of the 52-week range of USD 57.28 to USD 101.82. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 41.28. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 87.50. Considering the company's growth prospects, new product launches, solid margins, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 82.40, up 0.38% as of August 16, 2021, at 03:07 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.