Back to top

Image: Bigstock

Here's Why You Should Hold on to Align Technology (ALGN) Now

Read MoreHide Full Article

Align Technology, Inc. (ALGN - Free Report) has been gaining from record Invisalign Clear Aligner volumes in the teens segment. The company’s latest strategic collaborations instill our optimism. A strong solvency position also bodes well. However, macroeconomic woes and stiff competition raise apprehension over the company.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 1.5% compared with 4.7% growth of the industry and 23.4% rise of the S&P 500 composite.

The renowned global medical device company has a market capitalization of $44.13 billion. The company’s earnings have surpassed estimates in the trailing four quarters, delivering an average surprise of 20.4%.

Over the past five years, the company registered earnings growth of 60.1%, way ahead of the industry’s 11.7% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate of 21.7% also exceeds the industry’s growth projection of 12.5% and the S&P 500’s estimated 11.7% rise.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s delve deeper.

Key Drivers

Invisalign Holds Potential: Align Technology’s Invisalign Clear Aligner holds huge long-term market potential. During the third quarter, the company recorded an increase in Invisalign volumes within the teen segment, driven by increased Invisalign utilization and case submissions from Invisalign doctors. Invisalign Clear Aligner volumes for teens rose 26.6% year over year to a record 206,000. This represented one-third of total cases shipped, with robust shipment growth from North American orthodontists and a record quarter for Teen in APAC. The company also expanded the next generation of the "Invis is" media campaign across EMEA, APAC and Brazil to raise awareness regarding Invisalign treatment in adults, parents, and teen consumers.

Strategic Alliances: We are encouraged by Align Technology's slew of strategic alliances. In the third quarter, the company in Australia expanded the media mix to include partners such as TikTok and Snapchat, which resulted in 250% year-over-year growth in unique visitors to its website. Meanwhile, in the second quarter, exocad expanded its market coverage with a new global OEM partner, Ivoclar Vivadent-- one of the largest manufacturers in the dental industry. It is also worth noting that the Invisalign brand is the Official Smile Partner of the Golden State Warriors along with its G League affiliate team Santa Cruz Warriors and its esports affiliate, the Golden Guardians.

Strong Solvency Position: Align Technology exited the third quarter with cash and cash equivalents of $1.24 billion. The company had no debt in the reported quarter. This is good news in terms of the company's solvency position, at least during the year of economic downturn, implying that the company is holding sufficient cash.


Economic Uncertainty: Align Technology attributed the waning earnings to the current macroeconomic crisis that impacted the overall dental market, resulting in continued soft dental sales. Furthermore, the ongoing COVID-19 pandemic has been jeopardizing the company’s financial position.

Competitive Landscape: Align Technology faces significant competition from traditional orthodontic appliance (or wires and brackets) players. The company has witnessed a continuous decline in average selling price, primarily resulting from advantage rebate, promotional activity and product mix.

Overdependence on Invisalign Technology System: The sale of its Invisalign Technology System, primarily Invisalign Technology Full and Invisalign Technology Teen, accounts for a vast majority of Align Technology’s total net revenues. The company’s business might be significantly impacted if orthodontists and general practitioners experience a drop in consumer demand for orthodontic services or if consumers become hesitant to adopt Invisalign Technology.

Estimate Trend

Over the past 90 days, the Zacks Consensus Estimate for Align Technology’s 2021 earnings has moved 1% to $11.10.

The Zacks Consensus Estimate for the company’s 2021 revenues is pegged at $3.94 billion, suggesting a 59.5% surge from the year-ago reported number.

Key Picks

A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Apollo Endosurgery, Inc. (APEN - Free Report) and Patterson Companies, Inc. (PDCO - Free Report) .

AMN Healthcare, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 16.2%. The company’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 19.5%, on average.

AMN Healthcare has outperformed its industry over the past year. AMN has gained 51% against the 57.2% industry decline. You can see the complete list of today’s Zacks #1 Rank stocks here.

Apollo Endosurgery, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 7%. The company‘s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 25.6%, on average.

Apollo Endosurgery has outperformed its industry in the past year. APEN has gained 103.1% versus the industry’s 2.2% fall.

Patterson Companies, sporting a Zacks Rank #2, has a long-term earnings growth rate of 9.9%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 3.7%.

Patterson Companies has underperformed its industry over the past year. PDCO has declined 10.9% versus the industry’s 4.8% rise.