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Align (ALGN) Rides on Volume Expansion Despite Cost Concerns

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On Jan 31, 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 economic unrest persists to cast a negative impact on Align Technology’s dental procedures. The stock carries a Zacks Rank #3 (Hold).

Shares of the company have outperformed its industry over the past six months. The stock has gained 30% against the industry's 5.4% fall.

Align Technology reported better-than-expected results for fourth-quarter 2019 with both earnings and revenues beating the Zacks Consensus Estimate. We are upbeat about the continued momentum in Invisalign volumes across all geographies. The sustained expansion of Invisalign customer base, particularly in teenage patient markets, buoys optimism.

Strong revenue growth in iTero scanners and services is also encouraging. The recently-inked distribution deal with Zimmer Biomet is impressive as well. The launch of the iTero Element 5D Imaging System is a crucial development. A bullish first-quarter 2020 guidance is indicative of the consistency level in overall strong growth momentum.

In terms of portfolio enhancement, right at the outset of the fourth quarter in North America, the company unveiled the Invisalign Moderate package, a 20-stage treatment solution designed for consumers whose treatment goals fall between the existing Invisalign Lite and Invisalign comprehensive packages and can be completed within a period of five months to a year.

The company also introduced SmileView, an online tool created to help potential Invisalign patients visualize a straighter smile before starting with Invisalign treatment. Strong growth in Invisalign Go systems across all geographies continued with GP dentists and a boost from Invisalign Moderate.

On the flip side, operating costs flared up in the fourth quarter. We are also bothered about the current economic uncertainty affecting Align Technology’s dental procedures. The competitive landscape is an overhang too.

Key Picks

Some better-ranked stocks from the broader medical space are Perrigo Company plc PRGO, Hill-Rom Holdings, Inc. HRC and Myomo, Inc. MYO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Perrigo Companyhas a projected long-term earnings growth rate of 2%.

Hill-Rom’s long-term earnings growth rate is estimated at 11.1%.

Myomo’s long-term earnings growth rate is estimated at 25%.

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