Cognex Hammered On Ongoing Weakness In Core Markets

Wall Street is weird sometimes. Institutional investors spend remarkable amounts of time collecting data, and yet can still be flat-footed at surprising times. Given the slowdown in factory automation reported by companies like ABB (ABB), Rockwell (ROK), and Schneider (OTCPK:SBGSY), not to mention commentary on the auto and electronics markets from other automation providers like Yaskawa (OTCPK:YASKY) and Fanuc (OTCPK:FANUY), it should have been pretty clear that Cognex (CGNX) would see some real weakness here.

Granted, Cognex’s guide for a year-over-year decline in revenue in 2018 was surprising, so there’s certainly validity to being surprised by the magnitude of what’s going on at Cognex. What’s more, I think you can ask some very relevant questions about whether 2018/2019 is a dip in an otherwise strong investment cycle, or whether 2017/2018 was more of a “supercycle”-like plateau that gave investors a false sense of the near-term market opportunity for machine vision.

I’m still bullish on the machine vision opportunity and Cognex’s long-term opportunities, but guidance for 2020 later this year will be critical. In the high $40s Cognex isn’t a must-buy, and I previously said I was looking for a mid-$40s buy-in price before this revision, but it’s a tempting idea now.

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Cognex Hammered On Ongoing Weakness In Core Markets