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Align Rides on Firm Global Footprint Despite Fierce Rivalry

Zacks Equity Research

On Apr 8, we issued an updated research report on Align Technology, Inc. ALGN. The stock carries a Zacks Rank #3 (Hold).

Notably, Align Technology manufactures and markets clear aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and manufacturing) digital services used in dentistry, orthodontics and dental records storage.

Shares of the company have outperformed its industry over the past three months. The stock has rallied 13.8% compared with the industry's 7% growth. 

Align Technology exited the fourth quarter of 2018 on a solid note. We are upbeat about the continued strength in Invisalign volumes. In North America, the company consistently witnessed an expanding GP dentist customer base along with a steady uptake of Invisalign by orthodontists.

We are also encouraged by the company’s solid performance in the Europe, Middle East and Africa and Asia-Pacific markets. The company is also witnessing sturdy worldwide teen case growth. It launched the Invisalign with mandibular advancement feature in the United States during the fourth quarter, post the receipt of an FDA approval last October. Per management, through the end of the quarter under review, more than 17,000 teenagers used the product, led by strength in China, Canada, France and Spain.

Align Technology, Inc. Price

Align Technology, Inc. Price | Align Technology, Inc. Quote

Moreover, robust revenues from the iTero scanner contributed substantially. The company has been gaining traction from the shipments of the iTero Element intraoral scanner to China. Also, the company has begun manufacturing the iTero Element intraoral scanner in China after securing a Certificate of Medical Device Registration and Certificate of Production from the China Food and Drug Administration (CFDA). Align Technology is witnessing improved sales within the Scanner and Services business on the global front including Italy, Japan and China.

We are also optimistic about the company’s expansion of the iTero Element portfolio with the launch of iTero Element 2 and iTero Element Flex scanners in the United States and a majority of European countries ranging from France, Germany, Italy, Spain to the United Kingdom. The company is benefiting from an impressive response for the product, particularly regarding the restorative GP dentists in North America.

On the flip side, an adverse foreign exchange translation persists to raise concerns for Align Technology’s overseas operations. Also, escalating costs and expenses are weighing on its margins. Moreover, a tough competitive landscape and other macroeconomic headwinds pose a threat to the stock.

Key Picks

A few better-ranked stocks in the broader medical space are ABIOMED, Inc., ABMD, Varian Medical Systems, Inc. VAR and Masimo, Inc. MASI, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABIOMED’s long-term earnings growth rate is expected at 27.67%.

Varian’s long-term earnings growth rate is projected at 8%.

Masimo’s long-term earnings are estimated to grow 15.60%.

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