Cognex Shares Plunged: What You Need to Know

By Anders Bylund | More Articles
August 31, 2011 | Comments (1)

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of visual data analysis expert Cognex (Nasdaq: CGNX ) took their eye off the ball today, falling as much as 10.9% on heavy trading.

So what: Analyst firm Piper Jaffray just downgraded Cognex from buy to hold, citing high risk and an overheated valuation. Much of Cognex's sales come from the semiconductor industry, and after scary reports from Intel (Nasdaq: INTC ) and others, the prospects for great sales into that flagging sector appear "weak."

Now what: Cognex did indeed look a bit overvalued heading into this downgrade, share prices having risen 83% over the last year to leave rivals such as AMETEK (NYSE: AME ) , Orbotech (Nasdaq: ORBK ) , and MKS Instruments (Nasdaq: MKSI ) firmly in the dust. The stock remains richly valued, but then it wasn't cheap when the Stock Advisor team picked it out for our flagship newsletter, either. Jaffray's concerns seem shortsighted to me, making this a buy-in opportunity for patient investors. Learn more about Cognex with a free 30-day trial of Stock Advisor.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. Motley Fool newsletter services have recommended buying shares of Cognex. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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Report this Comment On August 31, 2011, at 6:55 PM, TruffelPig wrote:

This downgrade is non-sense really. Have the down-graders realized the results of the last quarter?
Anyhow, I established a position today again at a 10% discount. The last one I sold.....I got in at 26 and sold at 36.....probably ok I guess, now I am back in with a 30% positions. Market and falling are an argument to watch out on industrial stocks.
Good news: chip prices are going up again and soon the summer is over and tech goes up again :).

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