Align Technologies’ ALGN robust potential for Invisalign is well-poised to help it grow in the coming quarters. The company’s slew of strategic expansions also looks encouraging. Also, iTero is gaining from the rapidly evolving intraoral scanning technology in the industry. Meanwhile, the macroeconomic volatilities remain a concern for Align Technologies’ operations, while adverse currency impacts may limit its revenues.
In the past year, this Zacks Rank #3 (Hold) stock has declined 22.5% against the 1.7% rise of the industry and 27.3% growth of the S&P 500 composite.
The renowned medical device company has a market capitalization of $15.94 billion. ALGN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.2%.
Upsides for Align Technology Stock
Invisalign's Untapped Potential: Align Technology is strategically capturing the growing malocclusion market, one of the world’s most prevalent clinical dental conditions. Annually, only 22 million people globally elect treatment by orthodontists, meaning a large portion of the patient base is unattended. The company also noticed that almost all of this patient base could be treated with Invisalign Clear Aligner. This represents a significant opportunity for Align Technology to increase its share of the existingglobal marketof orthodontic case starts, especially among teens and expand the market for digital orthodontics.
In the third quarter of 2024, Clear Aligner’s volume of 617,000 was up 2.5% year over year. Clear Aligner volume from dental support organizations (DSOs) customers increased sequentially and year over year, reflecting growth across all regions.
In the teen and growing kids segment, the company reported a record 236,000 teen case starts, up 6.7% year over year, reflecting growth across regions, especially from Invisalign First in the APAC and EMEA regions.
Strategic Alliances: The company has well-established relationships with many DSOs, especially in the United States, and is continuously exploring collaboration with others that drive the adoption of digital dentistry. In the United States, Align Technology is focused on reaching young adults, teens and their parents through famous athletes, influencers and fashion designers, including Mazz Crosby, OverTime Megan and Kristin Juszczyk. According to the company, these partnerships create compelling brand activation at the Super Bowl. In the EMEA region, the company has partnered with new influencers to reach consumers across social media platforms, including TikTok and Meta.
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iTero in Focus: Align Technology’s iTero intraoral scanners, as the preferred scanning technology for digital dental scans, and its exocad CAD/CAM software, as the dental restorative solution of choice for dental labs, are successfully expanding their foothold in the niche market globally. This year, the company successfully launched the iTero Lumina intraoral scanner, its next generation of digital scanning technology.
In the third quarter, Systems and Services revenues were up 15.6%, reflecting higher scanner ASPs and non-systems revenues, driven by iTero Lumina, wand upgrades, increased scanner rentals, certified pre-owned leasing programs, as well as increased services revenues. Align Technology expects to begin a limited market release for the restorative software on the iTero Lumina scanner in the first quarter of 2025, followed by full commercialization shortly.
Downsides for ALGN Stock
Macroeconomic Concerns: The ongoing industry-wide trend of staffing shortages and supply chain-related hazards is denting revenues and margins for Align Technology. Deteriorating international trade, with global inflationary pressure leading to a tough situation related to raw material and labor costs as well as freight charges and rising interest rates, has all put the dental treatment space (which is highly elective) in a tight spot. In the third quarter, Align Technology’s revenues were dented partly due to more pronounced seasonality for Clear Aligners than expected, as well as continued weak consumer sentiment and a soft dental market, especially in the United States.
Currency Headwinds: Foreign exchange is a major headwind for Align Technology due to a considerable percentage of its revenues coming from outside the United States. From time to time, Clear Aligner Average Selling Prices (ASP) are significantly impacted by unfavorable foreign exchange across multiple currencies, especially the Japanese yen, Euro and Brazilian real. Further, in the third quarter of 2024, lower scanner ASPs resulted in a sequential decline in the Systems and Services revenues.
ALGN Stock Estimate Trend
The Zacks Consensus Estimate for Align Technologies’ 2024 earnings per share (EPS) has decreased to $9.39 from $9.46 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $4.04 billion. This suggests a 4.6% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Boston Scientific BSX and Phibro Animal Health PAHC.
Haemonetics has an earnings yield of 5.59% compared with the industry’s 1.35%. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 2.82%. Its shares have fallen 10.7% against the industry’s 11.6% growth in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 13.8%. Shares of the company have surged 62.6% compared with the industry’s 11.6% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.29%.
Phibro Animal Health, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 36.1% for fiscal 2025 compared with the industry’s 11.6%. Shares of the company have surged 87.4% compared with the industry’s 11.6% growth over the past year. PAHC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 25.47%.
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