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Align Technology (ALGN) at a 52-Week High: What's Driving It?
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Align Technology, Inc. (ALGN - Free Report) scaled a new 52-week high of $715.74 on Aug 24, before closing the session marginally lower at $712.84.
The company’s shares have charted a solid trajectory in recent times, appreciating 137% over the past year, ahead of the 29.2% rise of the industry it belongs to and the 30.1% surge of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 60.1%, way ahead of the industry’s 11.1% rise and the S&P 500’s 2.8% increase. The company’s long-term expected growth rate of 26.6% exceeds the industry’s growth projection of 14% and the S&P 500’s 11.3% increase.
Align Technology ended the second quarter of 2021 with better-than-expected results. The company is well poised for growth in the coming quarters backed by solid performance by both of its Clear Aligners and Systems & CAD/CAM Services segments. The company’s Invisalign Clear Aligner volumes witnessed solid growth during the quarter on strength in both adult and teen market segments. A strong solvency position bodes well for the stock.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Q2 Upsides: Align Technology exited the second quarter of 2021 with better-than-expected results despite the challenging business environment. The company reported solid revenue growth in the quarter under review, reflecting continued momentum in both Clear Aligners and Systems & CAD/CAM Services. Impressive international performance across geographies and increased shipment volumes buoy optimism on the stock. Robust gross margin expansion and year-over-year improvement in operating income are encouraging. The company has raised its full-year 2021 outlook, which is indicative of the continuation of this bullish trend.
Invisalign Holds Potential: We are optimistic about Align Technology’s Invisalign Clear Aligner which has been receiving positive feedback and holds huge long-term market potential. During the second quarter, Invisalign Clear Aligner volumes for teens were up 156% year over year to 181,000, representing one-third of total cases shipped, with strong growth in North America and EMEA orthodontists. The company also recorded an increase in Dental Support Organization (DSO) utilization led by Heartland and Smile Doctors, which outpaced non-DSO practices. Invisalign First for Invisalign treatment in young patients maintained its momentum. The general practitioner dentist (GP) channels recorded increased utilization with Invisalign Go and the adoption of Moderate.
iTero in Focus: The market is upbeat about Align Technology’s leading iTero scanners, which have been used to perform cumulatively, 40.1 million orthodontic scans and 8.4 million restorative scans by the end of second-quarter 2021. During the reported quarter, the iTero Element 5D Plus Imaging System continued to gain traction across all regions with strong adoption among new customers in the APAC and EMEA regions and with existing customers in the Americas region. The company also announced new iTero Workflow 2.0 software and previewed auto-upload functionality in the iTero Element 5D Imaging System in the quarter under review.
Strong Solvency Position: Align Technology exited the second quarter of 2021 with cash and cash equivalents of $1.09 billion compared with $1.13 billion at the end of 2021. The company had no debt in the reported quarter. This is good news in terms of the solvency position of the company, at least during the year of economic downturn, implying that the company is holding sufficient cash.
Downsides
Overdependence on Invisalign Technology System: Management fears that a reduction in consumer demand for orthodontic services, or consumers becoming reluctant to adopt Invisalign Technology might hurt the company’s business heavily as a vast majority of Align Technology’s total net revenues largely depends on the sale of its Invisalign Technology System (primarily Invisalign Technology Full and Invisalign Technology Teen). Also, the company’s operating results will suffer a severe setback, if consumers begin to prefer a competitive product over Invisalign Technology or if the average selling price of the Align Technology product declines.
Competitive Landscape: Align Technology faces significant competition from traditional orthodontic appliance (or wires and brackets) players such as 3M’s Unitek, Danaher Corporation’s Sybron Dental Specialties and Dentsply International. The company also competes with products similar to Invisalign Technology.
Zacks Rank and Key Picks
Currently, Align Technology carries a Zacks Rank #3 (Hold).
Image: Bigstock
Align Technology (ALGN) at a 52-Week High: What's Driving It?
Align Technology, Inc. (ALGN - Free Report) scaled a new 52-week high of $715.74 on Aug 24, before closing the session marginally lower at $712.84.
The company’s shares have charted a solid trajectory in recent times, appreciating 137% over the past year, ahead of the 29.2% rise of the industry it belongs to and the 30.1% surge of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 60.1%, way ahead of the industry’s 11.1% rise and the S&P 500’s 2.8% increase. The company’s long-term expected growth rate of 26.6% exceeds the industry’s growth projection of 14% and the S&P 500’s 11.3% increase.
Align Technology ended the second quarter of 2021 with better-than-expected results. The company is well poised for growth in the coming quarters backed by solid performance by both of its Clear Aligners and Systems & CAD/CAM Services segments. The company’s Invisalign Clear Aligner volumes witnessed solid growth during the quarter on strength in both adult and teen market segments. A strong solvency position bodes well for the stock.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Q2 Upsides: Align Technology exited the second quarter of 2021 with better-than-expected results despite the challenging business environment. The company reported solid revenue growth in the quarter under review, reflecting continued momentum in both Clear Aligners and Systems & CAD/CAM Services. Impressive international performance across geographies and increased shipment volumes buoy optimism on the stock. Robust gross margin expansion and year-over-year improvement in operating income are encouraging. The company has raised its full-year 2021 outlook, which is indicative of the continuation of this bullish trend.
Invisalign Holds Potential: We are optimistic about Align Technology’s Invisalign Clear Aligner which has been receiving positive feedback and holds huge long-term market potential. During the second quarter, Invisalign Clear Aligner volumes for teens were up 156% year over year to 181,000, representing one-third of total cases shipped, with strong growth in North America and EMEA orthodontists. The company also recorded an increase in Dental Support Organization (DSO) utilization led by Heartland and Smile Doctors, which outpaced non-DSO practices. Invisalign First for Invisalign treatment in young patients maintained its momentum. The general practitioner dentist (GP) channels recorded increased utilization with Invisalign Go and the adoption of Moderate.
iTero in Focus: The market is upbeat about Align Technology’s leading iTero scanners, which have been used to perform cumulatively, 40.1 million orthodontic scans and 8.4 million restorative scans by the end of second-quarter 2021. During the reported quarter, the iTero Element 5D Plus Imaging System continued to gain traction across all regions with strong adoption among new customers in the APAC and EMEA regions and with existing customers in the Americas region. The company also announced new iTero Workflow 2.0 software and previewed auto-upload functionality in the iTero Element 5D Imaging System in the quarter under review.
Strong Solvency Position: Align Technology exited the second quarter of 2021 with cash and cash equivalents of $1.09 billion compared with $1.13 billion at the end of 2021. The company had no debt in the reported quarter. This is good news in terms of the solvency position of the company, at least during the year of economic downturn, implying that the company is holding sufficient cash.
Downsides
Overdependence on Invisalign Technology System: Management fears that a reduction in consumer demand for orthodontic services, or consumers becoming reluctant to adopt Invisalign Technology might hurt the company’s business heavily as a vast majority of Align Technology’s total net revenues largely depends on the sale of its Invisalign Technology System (primarily Invisalign Technology Full and Invisalign Technology Teen). Also, the company’s operating results will suffer a severe setback, if consumers begin to prefer a competitive product over Invisalign Technology or if the average selling price of the Align Technology product declines.
Competitive Landscape: Align Technology faces significant competition from traditional orthodontic appliance (or wires and brackets) players such as 3M’s Unitek, Danaher Corporation’s Sybron Dental Specialties and Dentsply International. The company also competes with products similar to Invisalign Technology.
Zacks Rank and Key Picks
Currently, Align Technology carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the Medical - Dental Supplies industry include West Pharmaceutical Services, Inc. (WST - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
West Pharmaceutical has a long-term earnings growth rate of 28.4%.
Henry Schein has a long-term earnings growth rate of 13.9%.
Merit Medical has a long-term earnings growth rate of 13.6%.