Align Technology Navigates Challenges Amid Growth Potential

Align Technologies’ ALGN shows promising prospects for its popular Invisalign product, positioning the company for growth in upcoming quarters. Strategic expansions are also contributing positively. Additionally, the iTero scanner technology is benefiting from rapid advancements in the intraoral scanning market. Nonetheless, Align Technologies is facing challenges from macroeconomic fluctuations and adverse currency effects that could impact revenue.

In the past year, this Zacks Rank #3 (Hold) stock has fallen by 22.5%, in contrast to a 1.7% rise in the industry and a 27.3% increase in the S&P 500 composite.

Align Technologies, a prominent medical device company, boasts a market capitalization of $15.94 billion. The company has beaten earnings estimates in each of the last four quarters, with an average surprise of 6.2%.

Positive Aspects for Align Technology

Invisalign’s Growth Opportunities: Align Technology is strategically addressing the malocclusion market, a common dental issue globally. Only 22 million people worldwide seek orthodontic treatment annually, leaving a considerable portion untreated. Most of these patients could benefit from Invisalign Clear Aligners, presenting a significant growth opportunity in the existing global orthodontic market, particularly for teenagers, and the expanding field of digital orthodontics.

In the third quarter of 2024, the volume of Clear Aligners reached 617,000, marking a 2.5% increase year-over-year. This growth was echoed across dental support organizations (DSOs) as well, indicating a positive trend in all regions.

Specifically in the teen and children’s segment, Align reported a record 236,000 teen case starts, showing a 6.7% increase from the previous year, particularly driven by the popularity of Invisalign First in the APAC and EMEA regions.

Strategic Partnerships: Align Technology has formed strong partnerships with numerous DSOs, especially in the U.S., and is seeking further collaborations to boost digital dentistry. Targeting young adults, teens, and their parents, the company has engaged famous athletes, influencers, and designers like Mazz Crosby, OverTime Megan, and Kristin Juszczyk to enhance brand visibility, notably during events like the Super Bowl. In the EMEA region, new influencer collaborations are tapping into social media platforms, including TikTok and Meta.

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iTero’s Advancements: Align Technology’s iTero intraoral scanners and its exocad CAD/CAM software are gaining traction as leading solutions in the digital dental market. This year, the iTero Lumina scanner was launched, representing a significant innovation in digital scanning technology.

In the third quarter, revenues from Systems and Services rose 15.6%, driven by higher average selling prices (ASPs) of scanners and additional revenues from iTero Lumina, rental agreements and service improvements. Align anticipates a limited release of its restorative software for the iTero Lumina scanner by the first quarter of 2025, aiming for full commercialization shortly thereafter.

Challenges Facing ALGN Stock

Macroeconomic Pressures: Align Technology is grappling with staffing shortages and global supply chain issues, which are adversely affecting revenues and profit margins. Challenges from inflation, increased raw material and labor costs, along with rising interest rates, are placing pressure on an already strained elective dental market. In the third quarter, Align’s revenues faced setbacks due to unexpected seasonality effects with Clear Aligners and persistently weak consumer sentiment, particularly in the U.S. dental market.

Currency Fluctuations: Align Technology contends with currency challenges since a substantial portion of its revenues is sourced internationally. Average selling prices for Clear Aligners have been negatively affected by unfavorable currency fluctuations in key markets such as Japan, Europe, and Brazil. Furthermore, in the third quarter of 2024, lower scanner ASPs contributed to the decline in revenues from Systems and Services.

ALGN Stock Outlook

The Zacks Consensus Estimate for Align Technologies’ earnings per share (EPS) for 2024 has recently decreased from $9.46 to $9.39 within the last month.

The anticipated revenues for 2024, as per the Zacks Consensus Estimate, stand at $4.04 billion, reflecting a 4.6% increase compared to the previous year.

Promising Alternatives

Notable stocks in the broader medical sector include Haemonetics HAE, Boston Scientific BSX, and Phibro Animal Health PAHC.

Haemonetics features an earnings yield of 5.59%, surpassing the industry average of 1.35%. The company exceeded the Zacks Consensus Estimate in three of the past four quarters, with an average surprise of 2.82%. Its stock price has dropped by 10.7%, while the industry surged by 11.6% over the past year.

Currently backed by a Zacks Rank #2 (Buy), Haemonetics invites attention. You can view the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific also holds a Zacks Rank #2 and boasts a projected long-term earnings growth rate of 13.8%. The company’s shares have surged 62.6%, overshadowing industry growth of 11.6%. Boston Scientific has consistently beaten earnings estimates in the last four quarters, realizing an average surprise of 8.29%.

Phibro Animal Health, rated Zacks Rank #2, projects an earnings growth rate of 36.1% for fiscal 2025, compared to the industry’s 11.6%. Its shares have soared 87.4% against an industry increase of 11.6% in the past year, with earnings surprises in all preceding quarters averaging 25.47%.

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Boston Scientific Corporation (BSX): Free Stock Analysis Report

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