Margin Pressure Could Make 2018 A Transition Year For Cognex, Goldman Sachs Says In Downgrade

Slowing growth and lower margins are likely to put near-term pressure on Cognex Corporation CGNX, according to Goldman Sachs.

The Analyst

Joe Ritchie of Goldman Sachs downgraded Cognex from Buy to Neutral and lowered the stock’s 12-month price target from $78 to $55.

The Thesis

In the long run, Cognex will stand to benefit from technological adoption driven by automation tailwinds such as wage inflation, lack of skilled manufacturing workers and an aging factory installed base, Ritchie said in a Tuesday note.

“We continue to view CGNX as a high-quality franchise with best-in-class margins," he said.

This year could prove to be one of transition year for the machine vision company, as opex growth is likely to exceed topline growth, putting pressure on margins, Ritchie said. 

“Opex is likely to grow faster than sales as CGNX continues to invest in longer-term secular opportunities."

Price Action

At the time of publication, Cognex shares were trading up 1.15 percent at $50.45.

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