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Align (ALGN) Rides on Robust Invisalign Sales Amid Coronavirus

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On Dec 28, we issued an updated research report on Align Technology, Inc. (ALGN - Free Report) . The company is riding on strong product development and a consistent focus on international markets. However, the current global economic unrest casts a negative impact on Align Technology’s dental procedures. The stock carries a Zacks Rank #3 (Hold).

Align Technology has been outperforming its industry over the past six months. The stock has surged 108.3% compared with the industry's 21.4% rise.

Align Technology exited the third quarter of 2020 with better-than-expected results despite the challenging business environment. The company saw significantly higher sales of Invisalign clear aligners and iTero scanners amid the pandemic. Impressive international performance across geographies and increased shipment volumes buoy optimism on the stock.

Align’ Technology’s Invisalign clear aligner has been receiving positive feedback and holds huge long-term market potential. The recent dull performance of this business was due to the pandemic-led market crisis and is not expected to linger. We are in fact impressed that even amid such a situation, the company trained a significantly higher number of doctors through virtual courses, summits and forums.

Through the third quarter, Align Technology witnessed recovery in its orthodontic channel with an uptick in Invisalign comprehensive treatments in the teens and pre-teen segment across most regions, with pronounced growth in APAC in the teen segment.

Further, utilization improved during the quarter, with teen shipments witnessing faster recovery in North America. Dental Support Organization (“DSO”) utilization also increased during the quarter and continues to be a strong driven by Heartland Dental and Aspen Dental Management, Inc.

In terms of product launch, in September, the company added the Steraligner aligner cleaning system to the Invisalign Doctor Site web store and InvisalignAccessories.com.
The company recently announced the global availability of its next generation proprietary treatment-planning software, ClinCheck Pro 6.0.

On the flip side, the unabated spread of the pandemic has jeopardized Align Technology’s business outlook for the fourth quarter. Uncertainties regarding the duration and impact of the coronavirus pandemic on the company’s overall business have compelled it to refrain from providing any guidance for the fourth quarter of 2020.

Foreign exchange impacts, overdependence on Invisalign and tough competition are other headwinds.

This apart, slower growth in young adult cases in North America is concerning.

Key Picks

A few better-ranked stocks from the broader medical space include Addus Homecare Corporation (ADUS - Free Report) , Chemed Corporation (CHE - Free Report) , and DaVita Inc. (DVA - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Addus Homecare has a projected long-term growth rate of 15%.

Chemed has a projected long-term growth rate of 10.1%.

DaVita has a projected long-term growth rate of 18.3%.

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