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Align Technology Teen Case Growth High, Competition Lingers

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On Mar 5, we issued an updated research report on Align Technology, Inc. (ALGN - Free Report) . The stock carries a Zacks Rank #3 (Hold).

Notably, Align Technology manufactures and markets clear aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and manufacturing) digital services used in dentistry, orthodontics and dental records storage.

Shares of the company have outperformed its industry over the past three months. The stock has rallied 13.8% compared with the industry's 7% growth. 

Align Technology exited the fourth quarter of 2018 on a solid note. We are upbeat about the continued strength in Invisalign volumes. In North America, the company consistently witnessed an expanding GP dentist customer base along with a steady uptake of Invisalign by orthodontists.

We are also encouraged by the company’s solid performance in the Europe, Middle East and Africa and Asia-Pacific markets. The company is also witnessing sturdy worldwide teen case growth. It launched the Invisalign with mandibular advancement feature in the United States during the fourth quarter post the receipt of an FDA approval last October. Per management, till the end of the quarter under review, more than 17,000 teenagers have used the product, led by strength in China, Canada, France and Spain.

Moreover, robust revenues from iTero scanner contributed substantially. The company has been gaining traction from shipments of the iTero Element intraoral scanner to China. Also, it has begun manufacturing the iTero Element intraoral scanner in China after securing a Certificate of Medical Device Registration and Certificate of Production from the China Food and Drug Administration (CFDA). Align Technology is witnessing rise in sales within the Scanner and Services business globally including Italy, Japan and China.

We are also upbeat about the company expanding the iTero Element portfolio with the launch of iTero Element 2 and iTero Element Flex scanners in the United States and a majority of European countries ranging from France, Germany, Italy, Spain to the United Kingdom. The company is gaining an encouraging response for the product, particularly regarding restorative GP dentists in North America.

On the flip side, an adverse foreign exchange translation persists to raise concerns for Align Technology’s overseas operations. Also, escalating costs and expenses are weighing on its margins. Moreover, a tough competitive landscape and other macroeconomic headwinds pose a threat to the stock.

Zacks Rank & Key Picks

Align Technology has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are ABIOMED, Inc., (ABMD - Free Report) , Varian Medical Systems, Inc. (VAR - Free Report) and Masimo, Inc. (MAS - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABIOMED’s long-term earnings growth rate is expected at 27.67%.

Varian’s long-term earnings growth rate is projected at 8.00%.

Masimo’s long-term earnings are estimated to grow 15.60%.

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