Align's (ALGN) Invisalign Sales Grow Globally Amid Margin Woe
Align Technology’s ALGN robust product line, balanced growth across all channels and consistent focus on international markets to drive growth bolster our confidence in the stock. On the flip side, we remain concerned about the current economic uncertainty, which continues to cast a negative impact on Align Technology’s dental procedures. The stock carries a Zacks Rank #3 (Hold).
Over the past year, Align Technology has outperformed its industry. The stock has gained 40.9% compared with the industry’s 24.2% rise.
Align Technology’s first-quarter 2023 earnings and revenues exceeded the respective Zacks Consensus Estimate. The sequential increase in first-quarter revenues reflects stability across all regions for the Clear Aligner business and a favorable average selling price (ASP) for the Clear Aligner and Systems and Services segments.
Non-case revenues increased year over year, driven by continued growth from the Invisalign Doctor subscription program and the Vivera Retainers. During the quarter, the EMEA region witnessed an increase in Clear Aligner cases for teenagers compared to the prior-year quarter. This reflects the increased utilization and recent introduction of Invisalign moderates across the region, which outpaced the year-over-year growth rate of Invisalign First.
Align Technology, Inc. Price
Align Technology, Inc. price | Align Technology, Inc. Quote
The teen segment, which represents the largest portion of the 21 million annual orthodontic case starts, registered 182,000 teens and kids starting treatment with Invisalign Clear Aligners during the first quarter. The numbers increased both year over year and sequentially.
The initial adoption of Invisalign Comprehensive was well-received in the market. The company is confident about a largely untapped market opportunity for digital orthodontics and restorative dentistry. The company expects 2023 to be a crucial year for innovation.
On the flip side, during first-quarter 2023, across the Clear Aligner operating segment, revenues were down year over year, primarily due to lower volumes and lower ASPs, including unfavorable foreign exchange, partially offset by higher non-case revenues. Invisalign ASPs for comprehensive treatment were almost flat on a year-over-year basis, primarily due to a product mix shift, unfavorable foreign exchange and higher discounts.
Systems and services revenues decreased 9.7% sequentially, primarily due to seasonally lower scanner volume. On a year-over-year basis, System and Services revenues were unfavorably impacted by foreign exchange of approximately $5.8 million.
The contraction of both margins is worrisome. Align Technology’s operating expenses reported during the quarter increased due to higher incentive compensation and continued investments in sales and R&D activities.
The volatility surrounding inflationary pressure and other macroeconomic headwinds continue to pose challenges for the company.
Meanwhile, Align Technology faces significant competition from traditional orthodontic appliance (or wires and brackets) players such as 3M’s Unitek, Danaher Corporation’s Sybron Dental Specialties and Dentsply International. The company also competes with products similar to Invisalign Technology, such as products from Ormco Orthodontics, a division of Sybron Dental Specialties.
Key Picks
Some better-ranked stocks in the broader medical space are CONMED CNMD, Merit Medical Systems, Inc. MMSI and Boston Scientific Corporation BSX.
CONMED, carrying a Zacks Rank #2 (Buy), has an estimated long-term growth rate of 19.4%. The company’s earnings surpassed estimates in two of the trailing four quarters, missed once and met in another, delivering a negative average surprise of 10.54%.
CNMD’s shares have risen 54.2% in the past year compared with the industry’s 21.3% growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical, currently carrying a Zacks Rank #2, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Merit Medical has improved 60.2% compared with the industry’s 21.3% growth over the past year.
Boston Scientific, presently holding a Zacks Rank #2, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed twice, the average surprise being 1.9%.
Boston Scientific has gained 50.1% against the industry’s 19.2% decline over the past year.
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