Weaker demand from consumer electronics spooked investors holding Cognex (CGNX) but by the day’s end following its earnings report, the stock bounced back. The chief headwind with the stock price is that the company’s growth will not repeat that of the pace of 2017. But as a leader in machine vision and barcode reading, Cognex will bounce from the first-quarter seasonal lows. Higher expenses relative to revenue, which include healthy investments in the business, will pay off in the quarters ahead.
In the first quarter, expenses outpaced revenue growth, hurting operating margins. The quarter is typical for Cognex’s investments in RD&E and SG&A, costs in the business that will pay off as the year progresses. The market recognized temporary setback in profitability by bouncing back from the $40 intraday low and closing at $45. The strong buying interest on high volume suggests that CGNX stock will not revisit $40 any time soon.
