Here's Why You Should Buy Align Technology (ALGN) Stock Now
Align Technologies ALGN is well-poised to grow in the coming quarters, backed by thesignificant opportunity for Invisalign's expansion into the vast, untapped global malocclusion market. The growing demand for iTero intraoral scanners and exocad CAD/CAM software buoys optimism. Further, the company’s slew of strategic alliances looks impressive. However, substantial dependence on the Invisalign system and currency fluctuations remain concerning for ALGN.
In the past year, this Zacks Rank #3 (Hold) stock has increased 4.4% compared with the 15.8% rise of the industry and 31.8% growth of the S&P 500 composite.
The renowned medical device company has a market capitalization of $23.99 billion. ALGN projects an estimated earnings growth rate of 9.1% for 2024 compared with 7.4% of the industry. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 5.8%.
Let’s delve deeper.
Upsides
Invisalign’s Untapped Potential: Align Technology is strategically capturing the growing malocclusion market, one of the most prevalent clinical dental conditions in the world. The company’s May 2023 data indicates that approximately 500 million people globally have malocclusion. However, most of them do not seek orthodontic treatment, mainly due to the negative perceptions of metal braces, affordability of treatment and accessibility to doctors in certain markets and geographies.
Image Source: Zacks Investment Research
Annually, only 21 million people elect treatment by orthodontists, which means that a large portion of the patient base is unattended. ALGN noted that 90% of this patient base could be treated with Invisalign Clear Aligner, presenting a significant growth opportunity to increase its share in the existing global market of orthodontic case starts, especially among teens, and expand the market for digital orthodontics, especially among adults. By the end of 2023, the company had treated 17 million patients with Invisalign, including 4.7 million teens.
iTero in Focus: Align Technology’s iTero intraoral scanners and exocad CAD/CAM software are gaining prominence in the global dental market as the preferred scanning technology for digital dental scans and the dental restorative solution of choice for dental labs, respectively. Beginning patient care with the early usage of iTero intraoral scanners and combining the results with digital workflows help visualize and evaluate various treatment options with detailed imagery and CAD/CAM solutions.
In the fourth quarter of 2023, ALGN introduced the iTero Lumina inter-oral scanner with a smaller wand and unparalleled data capture capabilities for scanning by clinical members. The scanner is presently available with orthodontic workflows and will be available in the second half of 2024 restorative workflows. Per the company, the use of iTero scanners for Invisalign case submissions continues to grow and remains a positive catalyst for Invisalign utilization.
Strategic Alliances: Align Technology has well-established relationships with many DSOs in the United States and is continuously exploring collaboration to drive the adoption of digital dentistry. In 2023, the company focused on reaching young adults, teens and their parents in the Americas through influencer and creator-centric campaigns by partnering with leading smile squad creators, including Marshall Martin, Rally Shaw and Jeremy Lin.
ALGN also teamed up with Athletes Over Time, a high school sports social media platform that showcases the benefits of Invisalign treatment. In the EMEA region, the company partnered with new influencers to reach consumers across social media platforms, including TikTok and Meta. In Germany, Align Technology launched new testimonial campaigns, highlighting the stories of 70 young adults and teens who share why they chose Invisalign treatment and how it impacted their lives.
Downsides
Currency Headwinds: During the fourth quarter of 2023, the unfavorable effect of foreign exchange reduced revenues and margins significantly for Align Technology. Clear aligner revenues witnessed an unfavorable foreign exchange impact of approximately $12.8 million or approximately 1.3% sequentially. Systems and services revenues were unfavorably impacted by approximately $2.1 million or approximately 1.2% sequentially.
Overdependence on the Invisalign Technology System: The bulk of Align Technology's net revenues largely depend on the sale of its Invisalign Technology System, primarily Invisalign Technology Full and Invisalign Technology Teen. Therefore, continued and widespread market acceptance by orthodontists, GPs and consumers is critical to the company’s future success. Management is concerned that a shift in consumers’ preference toward a more competitive product can hamper the company’s operating results.
Estimate Trend
The Zacks Consensus Estimate for Align Technologies’ 2024 earnings per share (EPS) has decreased to $9.39 from $9.46 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at 4.04 billion. This suggests a 4.6% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Cardinal Health CAH, Stryker SYK and DaVita DVA.
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 60% compared with the industry’s 17.4% rise in the past year.
CAH carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.36% compared to the industry’s 0.02%. Shares of the company have increased 26.2% compared with the industry’s 7.5% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.2%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.9%. Shares of DVA have rallied 74.7% compared with the industry’s 22% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Stryker Corporation (SYK) : Free Stock Analysis Report
DaVita Inc. (DVA) : Free Stock Analysis Report
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
