On Wednesday, Mizuho (NYSE:MFG) Securities initiated coverage on shares of Align Technology , Inc. (NASDAQ:ALGN), a prominent player in the dental and orthodontic market, with an Outperform rating and a price target of $295.
The new price target suggests a significant upside from the company's current trading levels of $236.63. InvestingPro analysis supports this outlook, indicating the stock is currently undervalued. With a market capitalization of $17.58 billion and strong profitability metrics, Align Technology continues to maintain its position as a market leader.
Align Technology has experienced a growth deceleration in the global dental/orthodontic market throughout 2023 and 2024, with clear aligners showing higher economic sensitivity compared to other subsegments. This has resulted in a more pronounced slowdown for Align Technology relative to its peers, reflected in its modest revenue growth of 4.03% over the last twelve months.
Despite the slowdown, InvestingPro data shows the company maintains a healthy gross profit margin of 70.32%, demonstrating operational efficiency. For deeper insights into Align's financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
However, Mizuho Securities anticipates that as the industry recovers, Align Technology could see the most substantial increase in revenue and profit growth within its peer group from 2025 to 2027. This outlook is based on the expectation that the company's clear aligner segment will benefit from a potential market rebound.
Currently, Align Technology's price-to-earnings (P/E) ratio is below 20x based on 2026 projections, which Mizuho considers to be a "trough multiple on bottom-cycle earnings." This follows a period where the company experienced a "peak multiple on peak earnings" during the 2020-2021 COVID-19 hyper-growth years.
For context, InvestingPro data shows the current P/E ratio stands at 39.91x, with analysts forecasting EPS of $9.38 for FY2024. InvestingPro subscribers have access to 10+ additional valuable insights about Align's valuation and growth prospects.
The $295 price target set by Mizuho is derived from a 24x P/E ratio, which is approximately a 40% discount to the 5-year historical average P/E ratio of 39x. This valuation is applied to Mizuho's 2026 earnings per share (EPS) estimate of $12.25, which is higher than the Street's consensus of $11.78. The firm's analysis indicates that Align Technology's stock may still be undervalued, even when applying a 20% discount to the 3-year average P/E ratio of around 30x.
In other recent news, Align Technology has seen several noteworthy developments. The company reported a slight increase in Q3 2024 revenues, rising 1.8% year-over-year to $978 million. This was largely due to the growth of Clear Aligner volumes by 2.5% to 617,000, primarily driven by expansion in international markets. Moreover, Align Technology announced a plan to repurchase $275 million of its common stock, part of a broader $1.0 billion stock repurchase program.
Align Technology has also announced the receipt of the CE Mark in Europe for its Invisalign® Palatal Expander System, with plans for commercial availability across the EMEA region in Q1 2025. This expansion is a significant step in broadening the use of the device to cater to different age groups.
Analysts from Stifel, Piper Sandler, and Needham maintained their respective ratings on Align Technology, despite reducing the price target to $275. Stifel's analysis highlighted the sensitivity of Align's stock to the Michigan Consumer Sentiment Index, suggesting potential stock movement influenced by consumer sentiment trends.
Piper Sandler emphasized the long-term potential of Align Technology, despite mixed signals in the orthodontic industry. Meanwhile, Needham maintained a Hold rating, citing the absence of a near-term recovery, but acknowledged the potential for future growth driven by the company's strategic initiatives.
These are the recent developments in the company, reflecting its strategic initiatives and market positioning.
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