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Tempe, Arizona-based Align Technology, Inc. (ALGN) designs, manufactures, and markets Invisalign clear aligners, as well as iTero intraoral scanners and services for orthodontists and general practitioner dentists. Valued at a market cap of $13.9 billion, the company’s clear aligner system corrects malocclusion using nearly invisible and removable appliances that gently move the tooth to a desired final position.
This orthodontics company's shares have significantly lagged behind the broader market over the past 52 weeks. Align has declined 41.1% over this time frame, while the broader S&P 500 Index ($SPX) has gained 17%. Moreover, the stock is down 10.5% on a YTD basis, compared to SPX’s 1.3% gain during the same time frame.
Zooming in further, ALGN’s underperformance looks even more pronounced when compared to the Health Care Select Sector SPDR Fund’s (XLV) marginal rise over the past 52 weeks and 8.2% return on a YTD basis.
On Feb. 5, ALGN released its Q4 earnings results, and shares of the company rose marginally the following day as the company delivered slightly better-than-expected adjusted earnings of $2.44 per share, which marginally increased from the year-ago quarter. However, its revenue advanced 4% year-over-year to $995.2 million but slightly missed the forecasted figure. Additionally, Align’s next quarter’s and full-year revenue guidance was less impressive as it came below analysts’ estimates.
Nonetheless, ALGN aims to invest between $100 million and $150 million in capital expenditures to support future expansion, primarily through building construction, facility improvements, and increased manufacturing capacity. This growth-focused investment, along with the earnings beat, likely contributed to the stock’s slight upward movement.
For the current fiscal year, ending in December, analysts expect ALGN’s EPS to grow 13.8% year over year to $7.98. The company’s earnings surprise history is mixed. It exceeded the Wall Street estimates in one of the last four quarters while missing on three other occasions.
Among the 13 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on nine “Strong Buy,” one “Moderate Buy,” two “Hold,” and one “Moderate Sell” rating.
This configuration is significantly more bullish than three months ago, with six analysts suggesting a “Strong Buy” rating.
On Feb. 6, Piper Sandler maintained an “Overweight” rating on ALGN but lowered its price target to $270, which indicates a 44.7% potential upside from the current levels.
The mean price target of $261.67 represents a 40.2% upside from Align Technology’s current price levels, while the Street-high price target of $295 suggests an upside potential of 58.1%.
