Prediction: Buying Cognex Today Will Set You Up for Life

Lee Samaha, The Motley Fool

Sat, Apr 26, 2025, 1:42 PM 4 min read

I'm not going to sugarcoat this: Machine vision company Cognex (NASDAQ: CGNX) is heading for a tough year, and there's a substantial risk that management won't have great news for investors when it delivers its first-quarter earnings on April 30. On the other hand, the stock looks like an excellent value for long-term investors searching for a growth stock to buy and hold for decades to come. Here's why.

The company makes machine vision and barcode reading technology. In a sense, it's the eyes and, increasingly, the brain of automated equipment. As manufacturing and logistics companies continue to invest in automated production lines and logistics, the demand for machine vision will increase.

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In addition, it's not only generating productivity by replacing labor in terms of inspecting, identifying, monitoring, and precisely guiding production lines and logistics, but the reality is that its machine vision solutions can do the job better than humans. Moreover, that ability is increasingly enhanced by embedding artificial intelligence (AI) learning tools that make its machine vision systems easier to set up and able to perform more complex tasks.

For an example of its technology, consider a smartphone manufacturer like Apple (previously cited as a significant customer) when it needs to monitor quality control or guide automated processes precisely. Similarly, there's electric-vehicle (EV) battery-making, another key market for Cognex, for which the precise management of automated processes is critical to production lines, and e-commerce fulfillment centers, where automation is essential.

I've mentioned the three key Cognex end markets: consumer electronics, automotive, and logistics. (The company also sells to various medical and factory automation customers.) Overall, management sees its end markets growing at 13% a year, with the company's growth outpacing the industry's 15% growth.

The company has previously achieved and bettered that rate, but the past few years have been challenging, to say the least.

In a nutshell, all three of its key end markets faced significant challenges. First, in logistics, demand boomed following the lockdowns as many companies accelerated their e-commerce investment plans, only to suffer a sharp retraction in recent years because of a natural correction from previous hypergrowth.