Align Technology, Inc. ALGN has been gaining from the expanding work-flow options of its leading iTero scanners. The initial adoption of the Invisalign comprehensive was well received in the market. However, economic uncertainty and stiff competition raise apprehension over the company.
Year-to-date, this Zacks Rank #3 (Hold) stock has gained 43.2% compared with an 7.4% rise of the industry and a 13.5% rise of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $23.11 billion. The company’s expected long-term earnings growth of 17.2%, ahead of the industry’s 11.6% rise.
Let’s delve deeper.
Key Growth Drivers
iTero in Focus: Align Technology has been focusing on expanding work-flow options of its leading iTero scanners. In the first quarter, services revenues increased year over year, primarily due to higher subscription revenues resulting from the large number of iTero scanners in the field. The company also had higher non-systems revenues reflecting increased scanner rentals, upgrades and certified pre-owned or CPO leasing programs.
In 2022, the company announced a strategic collaboration with Desktop Metal to supply iTero Element Flex scanners to Desktop Labs. The iTero Element Flex is the preferred restorative scanner for Desktop Labs and will connect dentists directly with a suite of offerings from Desktop Labs.
Strategic Alliances: Align Technology's slew of strategic alliances looks impressive. The company has well-established relationships with many DSOs, especially in the United States and is continuously exploring collaboration with others that drive the adoption of digital dentistry. Align Technology announced a $75-million equity investment in Heartland Dental.
During the first quarter, the company delivered 7.8 billion impressions and had 22.1 million visits to its websites. Align Technologies continues to invest in top media platforms such as TikTok, Snapchat, Instagram and YouTube across markets.
Invisalign Portfolio Expansion: Align Technology’s Invisalign portfolio offers orthodontic treatment to straighten teeth without metal braces.
During the first quarter, the company launched Invisalign Comprehensive three and three product in most markets. Instead of unlimited additional aligners within five years of the treatment end date, the latest configuration offers Invisalign comprehensive treatment with three additional aligners included within three years of treatment end date.
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The initial adoption of the product garnered a positive response. The company expects that its impact will be more meaningful and provide doctors with the desired flexibility. This will allow the company to recognize deferred revenues over a shorter period of time compared with the traditional Invisalign comprehensive product.
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, such as the products from Ormco Orthodontics, a division of Sybron Dental Specialties.
Economic Uncertainty: The general slowdown in the United States and certain international economies is having a negative impact on consumer spending and affecting Align Technology’s business fundamentals. Align Technology attributed the waning earnings to the macroeconomic crisis that affected the overall dental market and led to persistent soft dental sales for Align Technology. Dental procedures are primarily elective in nature and are deferred when unemployment levels rise.
In the past 90 days, the Zacks Consensus Estimate for Align Technology’s 2023 earnings has moved 4.1% north to $8.31.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $3.89 billion, suggesting a 4.2% surge from the year-ago reported number.
Some better-ranked stocks in the broader medical space are Addus Homecare Corporation ADUS, Merit Medical Systems, Inc. MMSI and Boston Scientific, Inc. BSX.
The Zacks Consensus Estimate for Addus Homecare’s 2023 earnings indicates 10.9% year-over-year growth. The Zacks Consensus Estimate for ADUS’s 2023 earnings has moved 0.5% north in the past 30 days.
Addus Homecare has a long-term estimated growth rate of 11.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical reported a first-quarter 2023 adjusted EPS of 64 cents, beating the Zacks Consensus Estimate by 16.4%. Revenues of $297.6 million surpassed the Zacks Consensus Estimate by 5.9%. It currently carries a Zacks Rank #2.
Merit Medical has a long-term estimated growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in two, the average surprise being 11.9%.
BSX has gained 31.6% compared with the industry’s 30% decline in the past year.
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