Monday, July 28, 2014

Opened: CGNX. Let's see what this earning gap stuff is all about.

CGNX put up monster earnings in my opinion and moved up 20% A.H.

Here's where it's coming from:

I bought @ 44.85 as it looked like it was going higher.  Its after hours high went over 47. This is a test trade for me as I want to put the post earnings continuation trade in my playbook.  The trouble of course is how do you know whether a particular move will be a break away gap or whether it will fade?

Unless I have real money on the line I don't think I can analyze my theory.  So I bought 100 shares, which is small enough that If the gap fills it won't damage my R.  It closed AH trading at  44.
I'll use 42 as the stop.

I've bet this CGNX will be a continuation move rather than a pop and drop.
Here's the S.A. type summary.

Cognex +23% AH on Q2 beat, strong guidance

    • Cognex (NASDAQ:CGNX) expects Q3 revenue of $165M-$170M, well above a $142M consensus. A major customer is expected to account for over $60M of the total.
    • While all three of Cognex's market segments contributed to its strong Q2 performance, the company states factory automation helped the most, with European demand picking up following a weak 2013. Both factory automation and surface inspection set new revenue records, and chip/electronics capital equipment grew Q/Q and Y/Y.
    • Gross margin was 76% vs. 77% in Q1 and 76% a year ago; GM is expected to slip to "the mid-70% range" in Q3.
    • R&D spend +15% Y/Y to $13.6M, SG&A spend +16% to $38.7M. $13M was spent on buybacks.
    • Opex is expected to rise 25% Q/Q in Q3 due to "further investments in growth areas," some of which won't be repeating in Q4. Q4 opex is only expected to be 10% above Q2 levels
  • The only potential negative I've seen is that margins guidance have been reduced and are seen dropping to the "mid 70s"    CGNX has the highest gross margins and second highest operational margins in the sector.  The 10Q stated that it was due to higher additional sales staff and other personnel expenses.  

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