On Friday, Stifel adjusted its outlook on shares of Align Technology (NASDAQ:ALGN), a medical device company known for its clear orthodontic aligners. The firm lowered the price target on the company's stock to $285 from $350, while still recommending it as a Buy. The revision reflects a mix of market dynamics and internal company factors that could influence Align's financial performance.
The analyst from Stifel noted several intra-quarter developments that could impact Align Technology's business. The weakening of the US dollar against major currencies is expected to benefit the company's average selling price (ASP), which was previously identified as a weak point in the second quarter of 2024.
Conversely, a stronger dollar relative to the Mexican peso is likely to reduce costs of goods sold (COGS). Moreover, a recent uptick in U.S. Consumer Confidence, as measured by the Michigan index, has exceeded expectations, potentially signaling a more favorable consumer spending environment.
Despite these positive indicators, the analyst pointed out that not all findings from their research were encouraging. Data from Lumina, a longitudinal study, showed improvement, but other areas such as the company's ventures with Costco (NASDAQ:COST) and initiatives in IPE/DSP did not meet expectations.
The analyst also mentioned that while Align Technology is exploring better financing options for customers, any significant benefits from these initiatives are not expected to materialize immediately.
The analyst concluded that despite the near-term challenges, Align Technology's risk/reward profile remains attractive. Some of the company's strategies, including partnerships and direct fabrication, may take time to positively influence the company's performance.
As a result, Stifel has slightly reduced its revenue estimate for 2024 and now projects a mid-single-digit percentage growth for 2025, which is more conservative compared to the high-single-digit percentage growth anticipated by other market analysts. Correspondingly, Stifel's earnings per share (EPS) forecast for Align Technology also falls below the consensus.
In other recent news, Align Technology has been the focus of several analyst reports. Financial advisory firm Needham has initiated coverage on the company's shares with a Hold rating, recognizing Align's potential for long-term earnings per share (EPS) growth and revenue growth rate of 6-7%. Meanwhile, Piper Sandler and Stifel have maintained positive ratings on Align Technology's shares, despite adjusting their price targets.
On the earnings front, Align Technology reported significant growth in the second quarter with total revenues of $1,028.5 million, marking a sequential increase and a rise year-over-year, primarily due to a surge in Clear Aligner volumes. The company'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%.
As part of recent developments, Align Technology introduced a discount program for Costco members in the United States, offering a $400 discount on Invisalign treatment with participating providers. The company also made a $75 million equity investment in Heartland Dental and launched the iTero design suite for 3D printing.
These are recent developments that investors should consider while assessing Align Technology's financial health and market position. It is important to note that these updates do not constitute endorsements or predictions, but offer insights into the company's current activities and performance.
InvestingPro Insights
To complement Stifel's analysis, recent data from InvestingPro offers additional context on Align Technology's financial position. The company's market capitalization stands at $17.15 billion, reflecting its significant presence in the medical device industry. Align's P/E ratio of 35.84 (adjusted for the last twelve months as of Q2 2024) suggests that investors are willing to pay a premium for the company's earnings, which aligns with Stifel's maintained Buy recommendation despite the lowered price target.
InvestingPro Tips highlight that Align Technology has been aggressively buying back shares, which could potentially support the stock price and increase shareholder value. This strategy may be particularly relevant given the analyst's view on the company's attractive risk/reward profile. Additionally, Align's PEG ratio of 0.85 indicates that the stock might be undervalued relative to its expected earnings growth, providing some support for Stifel's optimistic long-term outlook despite near-term challenges.
It's worth noting that InvestingPro offers 11 additional tips for Align Technology, which could provide investors with a more comprehensive understanding of the company's financial health and market position.
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