Here's Why You Should Retain Align Technology (ALGN) Stock Now
Align Technologies ALGN is well-poised for growth in the coming quarters, backed by its expanding its global presence to address the vast untapped demand in the malocclusion space. The company launched its first subscription-based clear aligner program DSP worldwide, which looks encouraging.
Mounting expenses are putting pressure on margins. Strong FX headwind impedes growth.
In the past year, this Zacks Rank #3 (Hold) stock has increased 13.1% compared with the 16.1% rise of the industry and 17.3% growth of the S&P 500 composite.
The renowned medical device company has a market capitalization of $15.13 billion. ALGN projects a long-term estimated earnings growth rate of 17.5% compared with 12.6% of the industry.
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. Annually, only 21 million people globally elect treatment by orthodontists. This suggests that a large portion of the patient base is unattended. ALGN also noticed that 90% of this patient base could be treated with Invisalign Clear Aligner.
Align Technology’s Invisalign Clear Aligner received positive feedback so far. Till the end of 2022, over 14 million people worldwide have been treated with the Invisalign System. During the third quarter, Clear Aligner volume for teens increased 9.9% sequentially and increased 8.4% year over year to 221.8 thousand cases, driven by continued strength from Invisalign First.
Invisalign Portfolio Expansion: Align Technology’s Invisalign portfolio offers orthodontic treatment to straighten teeth without metal braces.
In the past couple of years, the company has successfully launched its first subscription-based clear aligner program, the Doctor Subscription Program (“DSP”), worldwide. It introduced DSP in the United States and Canada in 2021 and expanded it to Spain and the Nordic countries in the second quarter of 2023. Align Technology plans to launch DSP in France and the U.K. in the second half of 2023.
Strategic Alliances: Align Technology's slew of strategic alliances looks impressive. The company has well-established relationships with many DSOs, especially in the United States and is continuously exploring collaboration with others that drive the adoption of digital dentistry.
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In 2023, in the Americas, Align Technology is focused on reaching young adults as well as teens and their parents through influencer and creator-centric campaigns partnering with leading smile squad creators, including Marshall Martin, Rally Shaw and Jeremy Lin. Each of these creators shared their personal experiences with Invisalign treatment and why they chose to transform their smile with Invisalign aligners.
Downsides
Currency Headwinds: Foreign exchange is a major headwind for Align Technology due to a considerable percentage of its revenues coming from outside the United States (in 2022, 44% of the company’s consolidated revenues came from international regions). Through the first nine months of 2023, the strengthening of the U.S. dollar against nearly every other major currency hampered Align Technology’s revenues in the international markets. This was mainly due to the Fed’s 10 consecutive aggressive hikes in interest rates to tackle inflation since March 2022.
Competitive Landscape: 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 the ones from Ormco Orthodontics, a division of Sybron Dental Specialties.
Estimate Trend
The Zacks Consensus Estimate for Align Technologies’ 2023 earnings per share (EPS) has declined from $8.76 to $8.38 in the past 90 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at 3.86 billion. The projection suggests a 3.3% rise from the year-ago reported number.
Other Key Picks
Some better-ranked stocks in the broader medical space are Abbott Laboratories ABT, Inari Medical NARI and Integer Holdings Corporation ITGR.
Abbott, carrying a Zacks Rank of 2 (Buy), reported adjusted earnings per share (EPS) of $1.14 in third-quarter 2023, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.14 billion outpaced the consensus mark by 3.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.8%.
Inari Medical, carrying a Zacks Rank #2, reported adjusted EPS of 4 cents in third-quarter 2023, beating the Zacks Consensus Estimate by a staggering 128.6%. Revenues of $119 million outpaced the consensus estimate by 2.3%.
Inari Medical has an estimated earnings growth rate of 725% for the following year. Inari Medical’s earnings surpassed estimates in all the trailing four quarters, the average being 66.8%.
Integer Holdings reported a third-quarter 2023 adjusted EPS of $1.27, beating the Zacks Consensus Estimate by 20.9%. Revenues of $404.7 million surpassed the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.
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Abbott Laboratories (ABT) : Free Stock Analysis Report
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Inari Medical, Inc. (NARI) : Free Stock Analysis Report
