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Align Technology shares drop on guidance cut; Piper Sandler lowers price target

EditorIsmeta Mujdragic
Published 07/25/2024, 12:40 PM
ALGN
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On Thursday, Align (NASDAQ:ALGN) Technology, the company known for its Invisalign dental products, experienced a change in stock outlook by Piper Sandler. The firm's analyst adjusted the price target on Align Technology (NASDAQ:ALGN) to $315 from the previous $330 while maintaining an Overweight rating on the stock.

The adjustment follows Align Technology's second-quarter earnings report, which showed revenue figures slightly below consensus expectations but exceeded projections on the bottom line. The company's reduction in revenue guidance, influenced by foreign exchange rates and product mix, prompted a roughly 5% decline in its share price during after-hours trading.

The past several quarters have presented challenges in revenue predictability for Align Technology, attributed to varying Invisalign volumes and other factors such as Average Selling Prices (ASPs).

Despite these challenges, Piper Sandler suggests that the current valuation levels are historically low and believes that the potential for aligner volume growth among teens and adults, along with observed operating margin (OM) improvements, justifies a continued positive outlook on the stock.

Piper Sandler's stance is that the current weakness in the stock presents a buying opportunity, reiterating an Overweight rating despite the revised price target. The firm underscores the importance of not dismissing the stock at this point, given the developments in volume improvements and operating margin upside, even as revenue growth is expected to be moderate for the year.

In other recent news, Align Technology, Inc. demonstrated robust growth in the second quarter of 2024, reporting total revenues of $1,028.5 million, marking a 3.1% sequential increase and a 2.6% rise year-over-year. This growth was primarily driven by a significant surge in Clear Aligner volumes, which saw a 6.2% sequential increase and a 3.2% rise compared to the same period last year.

However, Clear Aligner average selling prices were impacted by unfavorable foreign exchange rates and a shift in product mix.

Stifel, a financial services company, adjusted Align Technology's stock outlook, reducing the price target to $350 from the previous $350, yet maintained a Buy rating on the shares. This revision followed the company's strong Q2 performance, which saw a 6% quarter-over-quarter increase in case volumes.

Align Technology also made significant strides in other areas, with a $75 million equity investment in Heartland Dental and the introduction of the iTero design suite for 3D printing. The firm's Q3 worldwide revenue is projected to range from $980 million to $1 billion, with total revenue growth for fiscal 2024 expected to be up 4% to 6%.

Joe Hogan of Align Technology responded to inquiries about future expectations with projections of overall market stability, despite potential exchange rate fluctuations. The company's focus on expanding its market reach and improving doctor productivity continues to shape its growth trajectory.

InvestingPro Insights

Align Technology (NASDAQ:ALGN) has been navigating a complex market environment, and investors are keenly observing its financial metrics and management strategies. According to InvestingPro data, Align Technology boasts a market capitalization of $18.43 billion, with a P/E ratio that stands at 40.56, reflecting the market's valuation of the company's earnings. Notably, the company's PEG ratio, which measures the stock's value while considering earnings growth, is at an attractive 0.8, suggesting that Align may be undervalued based on its expected growth.

Amidst the financial figures, two InvestingPro Tips shed light on the internal dynamics at Align Technology. First, the company has a perfect Piotroski Score of 9, indicating strong financial health and suggesting that the fundamentals could support a rebound in stock performance. Additionally, management has been aggressively buying back shares, a sign that Align's leadership is confident in the company's future and is taking action to deliver shareholder value. These insights complement the analysis by Piper Sandler, providing a broader context for investors considering Align Technology's potential.

For those looking to delve deeper into Align Technology's prospects, there are 11 additional InvestingPro Tips available, which could offer valuable guidance on investment decisions. To explore these tips and gain a more comprehensive understanding of Align Technology's financial health and stock potential, visit InvestingPro. And for a limited time, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enhancing your investment research with expert insights.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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