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Why Shares in Cognex Slumped Again Today

What happened
Shares in machine vision company Cognex (NASDAQ: CGNX) slumped more than 8% as of midday today. The move follows a double-digit decline the previous day, intersected by the company’s first-quarter earnings report. The first-quarter results were fine, but the guidance and commentary on trading were not.
In February, on the fourth-quarter 2021 earnings presentations, management guided toward first-quarter 2022 revenue of $265 million to $285 million with a gross profit margin in the low 70% range. In fact, revenue came toward the high end of the range at $282.4 million, and gross profit margin of 72% was in line with guidance.
Machine vision is used to monitor production lines. Image source: Getty Images.

However, CEO Robert Willett’s commentary on trading conditions spooked the market. “We believe growth momentum is slowing,” he said. “We are currently hearing from customers that automation projects are taking longer to deploy, and some are being delayed because of supply chain challenges and staffing shortages.”
In addition, the second-quarter revenue guidance of $265 million to $285 million is below the market consensus of $293 million.
So what
The commentary and guidance are meaningful because Cognex tends to report large orders in the second and third quarters as its customers gear up to ramp production in the fourth. Moreover, it suggests Cognex is heading for a challenging year, as its customers pause spending due to well-documented supply chain challenges and labor issues. 
Now what
The year isn’t over yet, and Cognex’s order flow always tends to be very lumpy in any case. In other words, don’t be surprised if its order and revenue outlook improve through the year as the broader economy irons out the supply chain issues bedeviling it right now. Now could be an excellent time to start thinking about buying into an exciting long-term growth story. The need for machine vision is still high, and Cognex is the undoubted market leader.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cognex. The Motley Fool has a disclosure policy. –

What happened

Shares in machine vision company Cognex (NASDAQ: CGNX) slumped more than 8% as of midday today. The move follows a double-digit decline the previous day, intersected by the company’s first-quarter earnings report. The first-quarter results were fine, but the guidance and commentary on trading were not.

In February, on the fourth-quarter 2021 earnings presentations, management guided toward first-quarter 2022 revenue of $265 million to $285 million with a gross profit margin in the low 70% range. In fact, revenue came toward the high end of the range at $282.4 million, and gross profit margin of 72% was in line with guidance.

Machine vision is used to monitor production lines. Image source: Getty Images.

However, CEO Robert Willett’s commentary on trading conditions spooked the market. “We believe growth momentum is slowing,” he said. “We are currently hearing from customers that automation projects are taking longer to deploy, and some are being delayed because of supply chain challenges and staffing shortages.”

In addition, the second-quarter revenue guidance of $265 million to $285 million is below the market consensus of $293 million.

So what

The commentary and guidance are meaningful because Cognex tends to report large orders in the second and third quarters as its customers gear up to ramp production in the fourth. Moreover, it suggests Cognex is heading for a challenging year, as its customers pause spending due to well-documented supply chain challenges and labor issues. 

Now what

The year isn’t over yet, and Cognex’s order flow always tends to be very lumpy in any case. In other words, don’t be surprised if its order and revenue outlook improve through the year as the broader economy irons out the supply chain issues bedeviling it right now. Now could be an excellent time to start thinking about buying into an exciting long-term growth story. The need for machine vision is still high, and Cognex is the undoubted market leader.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cognex. The Motley Fool has a disclosure policy.

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