Cognex (CGNX): Rethinking Valuation After Goldman’s Rare Double Upgrade From Sell Directly to Buy

Cognex (CGNX) grabbed attention after Goldman Sachs issued a rare double upgrade, shifting its rating straight from Sell to Buy and sending the stock up about 5% in afternoon trading.

See our latest analysis for Cognex.

The 5.83% 1 day share price return to $36.83 stands out against a still cautious backdrop, with the 90 day share price return of minus 16.45% and 5 year total shareholder return of minus 52.82% suggesting sentiment may only just be turning.

If Cognex’s move has you rethinking opportunities in industrial tech, it might be worth scanning other high growth tech and automation names via high growth tech and AI stocks.

With earnings and revenue back on a growth path, a sizable discount to analyst targets, and a long term share price slide, is Cognex now a mispriced automation winner, or is the recent upgrade already baking in the next leg of growth?

Most Popular Narrative Narrative: 23.9% Undervalued

With Cognex closing at $36.83 versus a narrative fair value in the high $40s, the story frames today’s price as a sizable discount, hinged on sharp earnings expansion.

In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $241.2 million, and it would be trading on a PE ratio of 38.0x, assuming you use a discount rate of 8.2 percent.

Read the complete narrative.

Curious what justifies paying a premium style multiple for an industrial name, even after a pullback in the fair value estimate, while growth assumptions remain punchy and margins step up meaningfully? Dive into the narrative to see which specific revenue and profit milestones are doing the heavy lifting in this valuation roadmap.

Result: Fair Value of $48.40 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent pricing pressure in commoditizing vision hardware and slower than hoped adoption of cloud based AI software could quickly undermine the bullish margin thesis.

Find out about the key risks to this Cognex narrative.

Another View, Earnings Multiple Sends a Different Signal

While the narrative fair value and our models point to Cognex trading at a discount, its current price to earnings ratio of 56x looks stretched versus a fair ratio of 31.8x, a 24.7x industry average and 43.9x for peers, raising real questions about valuation risk if growth disappoints.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Cognex Narrative

If you see the outlook differently or want to test your own assumptions against the numbers, you can build a customized view in just a few minutes: Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Cognex.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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