Invisalign-maker Align Technology is setting itself up for a "show me story" this year with an expected uptick in growth, an analyst said Thursday. ALGN stock surged in morning trades, but pulled back somewhat at the close.
Late Wednesday, Align guided to a mid-single-digit percentage increase in total sales this year. William Blair analyst Brandon Vazquez says the guidance implies improving sales in the back half of 2024 and a greater than 250 basis points jump in operating margins.
"We believe a back-half-loaded 2023 and still relatively low mid-single-digit sales growth (half of which is likely coming from price) will give bears something to pick on," he said in a report. But he later added, "We think investors will want to own shares here given stabilizing end markets, underpenetrated total addressable market and new product launches that can help offset near-term end-market uncertainty."
On the stock market today, ALGN stock jumped 2.3% to 273.38. Shares briefly rose above their 200-day line for the first time since December, but couldn't hold onto that gain in more recent action, according to MarketSmith.com.
ALGN Stock: 60% Jump In Subscription Orders
During the December quarter, sales for the clear teeth-straightening device maker climbed roughly 6% to $956.7 million. That beat forecasts for $933.7 million, according to FactSet. Adjusted profit came in at $2.42 per share, up 13% and above projections for $2.18.
Align sells so-called touch-up cases through its dentist subscription program, or DSP. Notably, orders through that program ramped up 60% during the quarter, Vazquez said. Throughout 2023, DSP orders surged 85% to 73,000, Align Tech said in a presentation.
"These cases are above corporate margins and thus should drive more meaningful margin benefits as their mix increases over time," Vazquez said. "We model roughly 40% growth in DSP touch-up cases in 2024, translating to roughly 2 points of case volume growth."
Vazquez kept his outperform rating on ALGN stock. He noted the macro environment continues to improve for Align and its Invisalign product.
"Management's 2024 guidance was largely in line with or even slight above consensus, offering support to confidence on end-markets," he said.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
