Cognex Could Come Back To Life In 2022

The last six months or so have not been good ones for industrial stocks, and particularly higher-multiple growth stories. Within that limited context, then, Cognex (NASDAQ:CGNX) actually hasn't done so bad; the shares have lagged the broader industrial space by about 10% since my last update, but the shares have held up better than those of other high-multiple favorites like Fortive (FTV), IDEX (IEX), and Rockwell (ROK).

I do still have some modest concerns about a transition in how Cognex is viewed by the Street - less of a "pure" growth story and more of a "good growth… for an industrial" - but sentiment is difficult to predict, and I think Cognex still has a powerful tailwind from overall growth in automation adoption across multiple industrial end-markets. I'm also concerned that my double-digit growth projections are too aggressive, but again I see significant growth opportunity in existing served markets, growth in new markets, and opportunities to grow/acquire adjacent products and software.

Cognex isn't what I'd call "truly cheap", but I do see high-single-digit total annualized return potential at this level, and I think 2022 could be a better than expected year for growth, so I'm leaning more favorably on these shares even after the nearly 25% bounce of recent lows.

 

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Cognex Could Come Back To Life In 2022