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We recently upgraded Align Technology (ALGN - Analyst Report) to Neutral based on its encouraging fourth-quarter 2012 results and huge opportunities in the malocclusion market. Banking on its core product Invisalign, the company witnessed balanced sales growth across all its channels. The stock currently carries a Zacks Rank #3 (Hold).

Why the Upgrade?

Align exited 2012 on an encouraging note with its fourth-quarter results sailing past the expectations. Align's Invisalign Clear Aligner has helped the company establish itself as a strong player in the malocclusion market.

Over the past few quarters, sales have increased consistently due to the strength of this product. Moreover, several features have been introduced across the Invisalign system, designed to address some of the most significant treatment challenges encountered by doctors. The company’s Invisalign G3 and G4 are working successfully for its class II and class III patients.

According to the company’s recent study, over 99% of the Ortho and GP dentists in the U.S. are aware of G4. Moreover, we are encouraged with the recent launch of the next generation liner material SmartTrack for Invisalign Clear Aligner and feature enhancements of Invisalign G4, particularly in Europe. These features are working as major catalysts in strengthening the company's foothold in the huge teenage orthodontic market. Rising earnings estimates as well as a product with great appeal and untapped potential in the malocclusion market make us optimistic about Align.

Other Stocks to Consider

While we prefer to remain on the sidelines on Align Technology, other medical device stocks worth a look are Medical Action Industries Inc. , Given Imaging Ltd. and ResMed Inc. (RMD - Analyst Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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