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Align Technology, Walmart and Automatic Data Processing highlighted as Zacks Bull and Bear of the Day
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For Immediate Release
Chicago, IL – March 4, 2021 – Zacks Equity Research Shares of Align Technology, Inc. (ALGN - Free Report) as the Bull of the Day, Walmart Inc. (WMT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Automatic Data Processing, Inc. (ADP - Free Report) .
Align Technology is a new-age dental company, best known for its Invisalign system. The tech-focused firm posted back-to-back strong quarters to end 2020 on a high note and its outlook is impressive, as it seeks to grab more market share and further challenge the traditional orthodontics industry's old-school metal braces.
Straighter Teeth
Align was founded in 1997 and it went public back in 2001. The company designs and manufactures the Invisalign system. Let's allow Align to provide the basics in its own words:
"By combining advanced 3D modeling for digital treatment planning, shape-engineering based on biomechanical principles, and mass-customization and 3D printing, we've revolutionized the orthodontic industry."
The advanced clear aligner system has shaken up the orthodontics space, as people look for viable alternatives to traditional metal braces. ALGN helps provide similar abilities to straighten teeth and correct various other orthodontics issues.
The company works with dental professionals worldwide to provide their patients with the options for various Invisalign plans. Align works hand-in-hand with dentists and orthodontists, who are able to digitally scan a patient's teeth.
A digital plan is then finalized, and custom aligners are made using the firm's "state-of-the-art printing process." Most Invisalign users are then placed on schedules that provide them various lengths of time to wear each different set or single clear aligner. They are then swapped out, as the issues are fixed over time.
Align boasts that it has helped treat over 9.6 million patients with the Invisalign system. Along with the actual aligners, Align's iTero intraoral scanner and exocad CAD/CAM software helps identify the issues and create the best plans to fit the patient's needs.
The company's success over the last two decades has inspired other clear aligner companies to enter the market, including Candid and SmileDirectClub, which went public in 2019. The newer firms make similar claims. But there are some key differences.
For instance, Candid is focused on a totally at-home experience, with everything shipped and consultations done remotely. Meanwhile, SmileDirect gives customers the options of an in-person scan, or an at-home kit.
Solid Fundamentals
The other clear aligner companies are focused on a more modern telemedicine-style approach in the age of Teladoc and others. Instead, Align remains committed to a more hands-on experience where orthodontists regularly monitor a patient's progress in person, after conducting the initial scans and running through the options.
Millions of customers have opted for this in-person method since it can be a big investment and it is not as simple as trying on clothes and returning them if they don't fit. There is a reason that dentists and orthodontists have to go to school for a very long time, and it might be part of the reason why SmileDirect stock has largely underwhelmed since its Sept. 2019 IPO.
Align shares have climbed around 125% in the last year to crush its highly-ranked Medical-Dental Supplies industry's 22%. This is part of a larger run that's seen its stock price soar 650% in the last five years.
The recent market pullback has helped cool things down and possibly create a better buying opportunity. The stock fell another 6% Wednesday to close regular trading at $527 a share. This puts it about 16% below its early February records.
The downturn has also pushed it below neutral levels in terms of RSI at 38. Investors should note that anything under 30 on the Relative Stretch Index is often considered overbought, with anything above 70 regarded as oversold.
ALGN's valuation highlights its status as a growth stock since it trades at a solid premium to its industry. Yet, at 12.4X forward sales, it's trading below its own highs and at a big discount against other pandemic high-flyers like Shopify that trades at 40X. Plus, ALGN trades at a discount to Teladoc's 15.2X.
ALGN's growth highlights the strength of its business model amid increased competition. The company's revenue has climbed by an average of 25% in the past five years, and this figure is weighed down by just 3% growth in 2020.
The recent setback happened as dentist and orthodontist offices closed temporarily during the early days of the coronavirus, while people avoided some non-essential medical treatments. The firm's second quarter revenue fell 41%, but it quickly regained momentum, with Q3 sales up 21% and fourth quarter revenue up 28%.
ALGN topped our Q4 fiscal 2020 earnings and revenue estimates in early February. The company posted record revenue and volumes from Invisalign aligners and iTero scanners. Align also improved its balance sheet and increased its free cash flow. And company executives said that it saw greater adoption from both adults and teenagers.
Looking Ahead
Zacks estimates call for Align's first quarter FY21 revenue to climb 46%, with Q2 projected to skyrocket 139% against the easy-to-compare period last year. The company's earnings outlook is even more impressive over this stretch.
Longer-term, ALGN's adjusted fiscal 2021 earnings are projected to climb by 74% to $9.11 a share on the back of 40% or $1 billion stronger revenue that would see it pull in $3.47 billion. Align is then projected to follow up its FY21 expansion with 21% higher sales and 23% better earnings in fiscal 2022.
Bottom Line
The nearby chart highlights the company's improved overall earnings outlook, with its FY21 consensus up 13.5% and its FY22 figure up 10.5%. This bottom-line positivity helps Align grab a Zacks Rank #1 (Strong Buy) right now, alongside a "B" grade for Momentum in our Style Scores system.
Meanwhile, seven of the 10 broker recommendations Zacks has for Align come in at "Strong Buys." That said, there could more selling and volatility in the near-term.
But the long-term bull case remains in place as ALGN operates a relatively unique business within the broader medical space. And having straight teeth is hardly going out of style.
Walmart stock has fallen 15% in the last three months as Wall Street starts to price-in how difficult it will be to keep pace with the retailer's stellar, coronavirus-driven growth. Walmart also missed our fourth quarter FY21 earnings estimates in February.
Long-Term Positives
Walmart, Target, Costco, Amazon and other huge retailers grabbed more market share in the last year and saw their revenues surge. The growth was driven by their early "essential" status, as well as one-stop shopping offerings. The pandemic also showcased the longer-term strength of Walmart's continued push into e-commerce and the new age of retail.
WMT now has multiple delivery and pick up options and its digital platforms are more robust. The company in September launched its subscription service to help it challenge Amazon Prime.
The historic retailer has also partnered with secondhand e-commerce clothing firm ThredUp, as well as Shopify to bring more small businesses to its own third-party marketplace. And Walmart has bolstered its digital ad unit.
Possible Near-Term Setbacks
These efforts helped Walmart thrive during the pandemic. For instance, the company's full-year revenue jumped roughly 7% to mark its strongest top-line expansion since 2009.
WMT's fourth quarter sales growth was also impressive. Yet it still missed our adjusted earnings estimate by 8%. And its near-term outlook is a bit rough, as it goes up against a difficult-to-compete-against year.
Zacks estimates call for its revenue to slip by roughly 2% in the first quarter and 2% for the year. Meanwhile, its adjusted FY22 earnings are projected to come in flat. The nearby chart shows that analysts have lowered their overall earnings outlooks since its fourth quarter report.
Bottom Line
Walmart's recent downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. The stock fell another 2% during regular trading on Wednesday, which puts it about 15% off its early December 2020 records.
All that said, Walmart stock is still a viable long-term play and its recent downturn has made its dividend yield look juicier, at 1.7%. But given its hard-to-compare outlook in the near-term and the market's recent treatment of WMT, it might be best to stay away for now.
Additional content:
Markets Trimming Excess Ahead of Spring
Reminiscent of adults currently trying to work off the extra pounds they'd gained over the winter (not to mention a year-long pandemic), market indexes continue to shed some of their excess for another trading day Wednesday, melting some of the bulk from Tech (down 1.9% on the day) and Consumer Discretionary (-1.8%). The Dow slid into the red just before the close, -0.38%; the S&P 500 dipped 1.3% on the day, and the Nasdaq fared the worst: down 361 points, or -2.70%.
Once again, we did not see a lot of data to justify the size of the downward moves. Services data yesterday was mixed: Markit Services PMI came in nearly 100 basis points above expectations to 59.8, while ISM Services posted 55.3% — down from the projected 58.7% for February. For ISM, this is the lowest read since the index pushed over 50% nine months ago; for PMI, it's the highest level we've seen for six years.
A new Beige Book released Wednesday afternoon promoted mild optimism on what is expected to be a stronger rebound on good recent news, especially regarding the pace of new vaccinations. (Full access to Covid vaccines for all adults in the U.S. has now been moved to the end of May from July.) Most districts reported moderate increases in both demand and pricing, while conditions within certain broad sectors tended to vary widely.
Take real estate, for example: continued robust demand for both new and existing housing was prevalent in most of the 12 major metropolitan districts, while there was some deterioration in the hotel, retail and office buildings. Meanwhile, steel and lumber costs rose, matching demand in the construction space, while higher fuel prices, agriculture conditions and transportation all saw notable — if modest — increases.
Labor supply shortages were cited, especially among low-skill and skilled-trade positions. We saw this yesterday morning in the ADP private-sector jobs report than Construction and Manufacturing both posted job losses last month.
Thursday morning, we'll track new and continuing jobless claims for the past two weeks; Friday brings us the big Employment Situation numbers, including a new Unemployment Rate. The labor market will also be closely watched by Fed presidents ahead of their next meeting in a couple weeks.
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Align Technology, Walmart and Automatic Data Processing highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 4, 2021 – Zacks Equity Research Shares of Align Technology, Inc. (ALGN - Free Report) as the Bull of the Day, Walmart Inc. (WMT - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Automatic Data Processing, Inc. (ADP - Free Report) .
Here is a synopsis of all three stocks:
Bull of the Day:
Align Technology is a new-age dental company, best known for its Invisalign system. The tech-focused firm posted back-to-back strong quarters to end 2020 on a high note and its outlook is impressive, as it seeks to grab more market share and further challenge the traditional orthodontics industry's old-school metal braces.
Straighter Teeth
Align was founded in 1997 and it went public back in 2001. The company designs and manufactures the Invisalign system. Let's allow Align to provide the basics in its own words:
"By combining advanced 3D modeling for digital treatment planning, shape-engineering based on biomechanical principles, and mass-customization and 3D printing, we've revolutionized the orthodontic industry."
The advanced clear aligner system has shaken up the orthodontics space, as people look for viable alternatives to traditional metal braces. ALGN helps provide similar abilities to straighten teeth and correct various other orthodontics issues.
The company works with dental professionals worldwide to provide their patients with the options for various Invisalign plans. Align works hand-in-hand with dentists and orthodontists, who are able to digitally scan a patient's teeth.
A digital plan is then finalized, and custom aligners are made using the firm's "state-of-the-art printing process." Most Invisalign users are then placed on schedules that provide them various lengths of time to wear each different set or single clear aligner. They are then swapped out, as the issues are fixed over time.
Align boasts that it has helped treat over 9.6 million patients with the Invisalign system. Along with the actual aligners, Align's iTero intraoral scanner and exocad CAD/CAM software helps identify the issues and create the best plans to fit the patient's needs.
The company's success over the last two decades has inspired other clear aligner companies to enter the market, including Candid and SmileDirectClub, which went public in 2019. The newer firms make similar claims. But there are some key differences.
For instance, Candid is focused on a totally at-home experience, with everything shipped and consultations done remotely. Meanwhile, SmileDirect gives customers the options of an in-person scan, or an at-home kit.
Solid Fundamentals
The other clear aligner companies are focused on a more modern telemedicine-style approach in the age of Teladoc and others. Instead, Align remains committed to a more hands-on experience where orthodontists regularly monitor a patient's progress in person, after conducting the initial scans and running through the options.
Millions of customers have opted for this in-person method since it can be a big investment and it is not as simple as trying on clothes and returning them if they don't fit. There is a reason that dentists and orthodontists have to go to school for a very long time, and it might be part of the reason why SmileDirect stock has largely underwhelmed since its Sept. 2019 IPO.
Align shares have climbed around 125% in the last year to crush its highly-ranked Medical-Dental Supplies industry's 22%. This is part of a larger run that's seen its stock price soar 650% in the last five years.
The recent market pullback has helped cool things down and possibly create a better buying opportunity. The stock fell another 6% Wednesday to close regular trading at $527 a share. This puts it about 16% below its early February records.
The downturn has also pushed it below neutral levels in terms of RSI at 38. Investors should note that anything under 30 on the Relative Stretch Index is often considered overbought, with anything above 70 regarded as oversold.
ALGN's valuation highlights its status as a growth stock since it trades at a solid premium to its industry. Yet, at 12.4X forward sales, it's trading below its own highs and at a big discount against other pandemic high-flyers like Shopify that trades at 40X. Plus, ALGN trades at a discount to Teladoc's 15.2X.
ALGN's growth highlights the strength of its business model amid increased competition. The company's revenue has climbed by an average of 25% in the past five years, and this figure is weighed down by just 3% growth in 2020.
The recent setback happened as dentist and orthodontist offices closed temporarily during the early days of the coronavirus, while people avoided some non-essential medical treatments. The firm's second quarter revenue fell 41%, but it quickly regained momentum, with Q3 sales up 21% and fourth quarter revenue up 28%.
ALGN topped our Q4 fiscal 2020 earnings and revenue estimates in early February. The company posted record revenue and volumes from Invisalign aligners and iTero scanners. Align also improved its balance sheet and increased its free cash flow. And company executives said that it saw greater adoption from both adults and teenagers.
Looking Ahead
Zacks estimates call for Align's first quarter FY21 revenue to climb 46%, with Q2 projected to skyrocket 139% against the easy-to-compare period last year. The company's earnings outlook is even more impressive over this stretch.
Longer-term, ALGN's adjusted fiscal 2021 earnings are projected to climb by 74% to $9.11 a share on the back of 40% or $1 billion stronger revenue that would see it pull in $3.47 billion. Align is then projected to follow up its FY21 expansion with 21% higher sales and 23% better earnings in fiscal 2022.
Bottom Line
The nearby chart highlights the company's improved overall earnings outlook, with its FY21 consensus up 13.5% and its FY22 figure up 10.5%. This bottom-line positivity helps Align grab a Zacks Rank #1 (Strong Buy) right now, alongside a "B" grade for Momentum in our Style Scores system.
Meanwhile, seven of the 10 broker recommendations Zacks has for Align come in at "Strong Buys." That said, there could more selling and volatility in the near-term.
But the long-term bull case remains in place as ALGN operates a relatively unique business within the broader medical space. And having straight teeth is hardly going out of style.
Bear of the Day:
Walmart stock has fallen 15% in the last three months as Wall Street starts to price-in how difficult it will be to keep pace with the retailer's stellar, coronavirus-driven growth. Walmart also missed our fourth quarter FY21 earnings estimates in February.
Long-Term Positives
Walmart, Target, Costco, Amazon and other huge retailers grabbed more market share in the last year and saw their revenues surge. The growth was driven by their early "essential" status, as well as one-stop shopping offerings. The pandemic also showcased the longer-term strength of Walmart's continued push into e-commerce and the new age of retail.
WMT now has multiple delivery and pick up options and its digital platforms are more robust. The company in September launched its subscription service to help it challenge Amazon Prime.
The historic retailer has also partnered with secondhand e-commerce clothing firm ThredUp, as well as Shopify to bring more small businesses to its own third-party marketplace. And Walmart has bolstered its digital ad unit.
Possible Near-Term Setbacks
These efforts helped Walmart thrive during the pandemic. For instance, the company's full-year revenue jumped roughly 7% to mark its strongest top-line expansion since 2009.
WMT's fourth quarter sales growth was also impressive. Yet it still missed our adjusted earnings estimate by 8%. And its near-term outlook is a bit rough, as it goes up against a difficult-to-compete-against year.
Zacks estimates call for its revenue to slip by roughly 2% in the first quarter and 2% for the year. Meanwhile, its adjusted FY22 earnings are projected to come in flat. The nearby chart shows that analysts have lowered their overall earnings outlooks since its fourth quarter report.
Bottom Line
Walmart's recent downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) at the moment. The stock fell another 2% during regular trading on Wednesday, which puts it about 15% off its early December 2020 records.
All that said, Walmart stock is still a viable long-term play and its recent downturn has made its dividend yield look juicier, at 1.7%. But given its hard-to-compare outlook in the near-term and the market's recent treatment of WMT, it might be best to stay away for now.
Additional content:
Markets Trimming Excess Ahead of Spring
Reminiscent of adults currently trying to work off the extra pounds they'd gained over the winter (not to mention a year-long pandemic), market indexes continue to shed some of their excess for another trading day Wednesday, melting some of the bulk from Tech (down 1.9% on the day) and Consumer Discretionary (-1.8%). The Dow slid into the red just before the close, -0.38%; the S&P 500 dipped 1.3% on the day, and the Nasdaq fared the worst: down 361 points, or -2.70%.
Once again, we did not see a lot of data to justify the size of the downward moves. Services data yesterday was mixed: Markit Services PMI came in nearly 100 basis points above expectations to 59.8, while ISM Services posted 55.3% — down from the projected 58.7% for February. For ISM, this is the lowest read since the index pushed over 50% nine months ago; for PMI, it's the highest level we've seen for six years.
A new Beige Book released Wednesday afternoon promoted mild optimism on what is expected to be a stronger rebound on good recent news, especially regarding the pace of new vaccinations. (Full access to Covid vaccines for all adults in the U.S. has now been moved to the end of May from July.) Most districts reported moderate increases in both demand and pricing, while conditions within certain broad sectors tended to vary widely.
Take real estate, for example: continued robust demand for both new and existing housing was prevalent in most of the 12 major metropolitan districts, while there was some deterioration in the hotel, retail and office buildings. Meanwhile, steel and lumber costs rose, matching demand in the construction space, while higher fuel prices, agriculture conditions and transportation all saw notable — if modest — increases.
Labor supply shortages were cited, especially among low-skill and skilled-trade positions. We saw this yesterday morning in the ADP private-sector jobs report than Construction and Manufacturing both posted job losses last month.
Thursday morning, we'll track new and continuing jobless claims for the past two weeks; Friday brings us the big Employment Situation numbers, including a new Unemployment Rate. The labor market will also be closely watched by Fed presidents ahead of their next meeting in a couple weeks.
Questions or comments about this article and/or its author? Click here>>
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.