Back to top
We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties. You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies. In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Bear of the Day: Align Technology (ALGN)
Although many stocks have started to participate in the broader end-of-the-year rally, Align Technology (ALGN - Free Report) looks like one to avoid right now.
Mostly attributed to a weakening outlook, it's noteworthy that Align Technology’s Zacks Medical-Dental Supplies Industry is currently in the bottom 7% of over 250 Zacks industries.
Despite the company’s favorable long-term prospects as a provider of Invisalign clear aligners for the treatment of malocclusions or the misalignment of teeth, Align Technology’s stock currently lands a Zacks Rank #5 (Strong Sell) and the Bear of the Day.
Time for a Cooldown Amid Declining Earnings Estimates
Considering most of Align Technology’s +28% year-to-date gains came over the last month its stock certainly looks do for a correction or pullback as earnings estimate revisions are still noticeably lower in the last 60 days.
Image Source: Zacks Investment Research
Fiscal 2023 earnings estimates are down -3% over the last two months from $8.77 per share to $8.42 a share. More concerning, FY24 EPS estimates have dropped -9% from $10.33 per share to $9.40 a share.
Image Source: Zacks Investment Research
Unsupportive Valuation
With a current stock price of $270, Align Technology’s valuation doesn’t support its extensive rally over the last month trading at a 32.5X forward earnings multiple which is now noticeably above its industry average of 20.3X and the S&P 500’s 22.2X.
Image Source: Zacks Investment Research
Furthermore, Align Technology’s price-to-sales ratio of 5.4X is uncomfortably above the optimum level of less than 2X and a very stretched premium to its industry average of 0.4X and even the S&P 500’s 3.9X.
Image Source: Zacks Investment Research
Takeaway
Undoubtedly, investors are hoping the end-of-the-year rally can continue for the broader stock market but the recent spike in Align Technology shares appears to be overdone. It may be wise to fade the rally in Align Technology's stock or stay on the sidelines until better opportunities present themselves.