Here's Why You Should Hold on to Align Technology (ALGN) Now
With a market capitalization of approximately $30.39 billion, Align Technology’s ALGN solid Invisalign Technology prospects and growth in North America and outside should continue to boost top-line results. The strong uptake of iTero scanners across all geographies is encouraging as well.
Which Way Are Estimates Headed?
For the current quarter, the Zacks Consensus Estimate for earnings is pegged at $1.18, reflecting an increase of 16.8% on a year-over-year basis. The same for revenues is pegged at $500.9 million, showing an increase of 30% year over year.
For 2018, the Zacks Consensus Estimate for revenues is pinned at $1.97 billion, reflecting a rise of 33.9%. However, the same for earnings per share is pegged at $4.98, showing growth of 28% year over year.
The stock currently has a Zacks Rank #3 (Hold). Here we take a quick look at the primary factors that have been plaguing Align Technology and discuss the prospects that ensure near-term recovery of the stock.
Why Should You Retain Align Technology?
Align Technology has undertaken several strategies to drive adoption of Invisalign Technology that includes product/technology development, clinical effectiveness, expansion of the Invisalign Technology brand and international growth.
On a year-over-year basis, Align Technology’s international Invisalign Technology volumes in the last reported quarter grew impressively, reflecting continued strength in the Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC) regions. In EMEA, the company once again registered solid adoption of Invisalign technology in markets of Eastern and Central Europe. This apart, Align Technologies completed one million Invisalign shipments in the EMEA region recently.
In the APAC region, the company witnessed strong second-quarter volume growth led by China, Japan, Australia and New Zealand.
The solid uptake of iTero scanners across all regions is impressive as well. Further, Align Technology’s receipt of CFDA approval to manufacture the iTero Element intraoral scanner in China buoys optimism. We are also upbeat about the company expanding the iTero Element portfolio with the launch of iTero Element 2 and iTero Element Flex scanners.
Over the past three months, the company’s share price has outperformed its industry. The stock has gained 5.9% compared with the industry’s 3.7%.
What's Deterring the Stock?
A vast majority of Align Technology’s total net revenues largely depends on the sale of its Invisalign Technology System, primarily Invisalign Technology Full and Invisalign Technology Teen, and the same trend is expected to continue at least in the near term. Thereby, continued and widespread market acceptance of Invisalign Technology by orthodontists, GPs and consumers is critical to Align Technology’s success. Management fears that if orthodontists and GPs somehow experience a reduction in consumer demand for orthodontic services, or consumers become reluctant to adopt Invisalign Technology as rapidly as management expects, it might hurt the company’s business a great deal.
Also, if consumers start choosing a competitive product over Invisalign Technology or if the average selling price of Align Technology product falls, the company’s operating results will suffer.
Moreover, tough competition, rising operating costs and macroeconomic headwinds continue to weigh on the stock.
Key Picks
Some better-ranked stocks in the broader medical space are Intuitive Surgical ISRG, Amedisys, Inc. AMED and Masimo Corporation MASI.
Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock currently carries a Zacks Rank of 2 (Buy).
Amedisys’ long-term expected earnings growth rate is 18.6%. The stock holds a Zacks Rank #1 at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Masimo’s long-term expected earnings growth rate is 14.8%. The stock has a Zacks Rank #2 at present.
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