You may have noticed Align Technology making investor headlines recently. It was named the best-performing stock in the S&P 500 in 2017 and produced consecutive record-setting quarters in 2018. The Align Technology stock symbol is ALGN, and analysts recommend that it’s one stock to take note of.
Who is Align Technology (ALGN)?
Align Technology stock is the company behind Invisalign clear aligners based in San Jose, California. As a large stock with a strong balance sheet and high market liquidity, ALGN engages in the design, manufacture, and marketing of global medical devices. Align’s product offers clear aligners in place of traditional metal braces. Patients receive fully custom-made aligners using the company’s patented SmartTrack plastics based on Invisalign’s own 3-D imaging software called iTero, a leading digital scanner.
Approximately 89 percent of Align Technology’s revenue comes from its clear aligners called Invisalign. However, 11 percent of its fiscal revenue comes from its digital scanner iTero. Although the Align Technology stock is part of the medical industry, its intraoral scanner has seen such remarkable growth that it meets a lot of the same criteria for investors that are picking tech stocks.
What sets Invisalign apart from its competitors is that it is only sold through orthodontists. Other start-ups such as Smart Direct Club and Candid allow patients to skip the orthodontist altogether and receive their plastic aligners directly. Interestingly, Align had previously taken an equity stake in Smile Direct Club by supplying the company with non-Invisalign clear aligners, however, reserving its strongest resins for its own line.
Align Technology Stock Trends
Align Technology went public on the NASDAQ stock market in January 2001. It has since grown steadily but had an especially fantastic year in 2017. It closed at $98.12 on December 30th, 2016, and at $222.19 on December 29th, 2017. That’s an increase of about 125 percent in one year.
Co-founder of DataTrek Research, Nick Colas, believes that Invisalign seems to be the perfect product story with the explosion of the selfie generation. Moreover, Align Technology stock received a 10 percent boost after it was added to the Nasdaq-100 Index of the top 100 largest domestic and international non-financial companies based on market capitalization on October 23rd, 2017.
As expected, Align Technology stocks performed exceptionally well in 2018. ALGN broke sales records for the first two consecutive quarters.
In April 2018, Align Technology revealed its earnings from the first quarter, which reported a 40.8 percent year over year change with a net income of $95.9 million. This was an all-time high, likely due to strong growth in international markets and an increase in Invisalign’s average selling price. Align Technology also reported sales up 84 percent year over year for its iTero scanner and services business.
Align broke sales records again when it announced its second-quarter earnings with an increase of 37.5 percent year over year change and up 12.2 percent from the first quarter. It appeared that the company was making considerable headway for its teen market. Additionally, Align Technology opened its first treatment planning facility in Europe. Furthermore, it also received regulatory approval in China for its iTero Element intraoral scanner.
Although Align Technology still achieved record-high sales in the third quarter, sales and earnings slowed Align’s record-breaking momentum. Lower average selling prices from promotional discounts and unfavorable foreign exchange rates likely contributed to the decline — unfortunately, this left investors scrambling for the exits.
On October 23rd, 2018, the Align Technology stock price closed at $311.69. After it announced its third quarter financial results on October 24th, 2018, the Align Technology stock price dropped to $290.83 and continued to fall until October 29th, where it closed at $217.94.
However, those who held on saw an optimistic fourth quarter with another record-high revenue. In this quarter, Align added eight new stores in the United States as well as launched a new Invisalign treatment with mandibular advancement for teenage patients after securing FDA approval.
Align Technology stock came roaring back at the beginning of 2019. Align was able to top its guidance of first-quarter revenue between $525 million and $535 million with $549 million in sales. Unfortunately, its net income or bottom line was significantly lower than expected due to mandated closures of its U.S. Invisalign stores. Align expects that this mandated outcome from arbitration with Smile Direct Club to have no impact on fiscal 2019 revenue.
Align Technology Stock Risks and Analyst Predictions
Align has demonstrated its ability to continually adapt to changing markets and various challenges.
In the past, ALGN struggled with the ability to treat most orthodontic cases. In 2011, only certain patients could use these clear aligners. However, over the past decade, Invisalign has seen more orthodontists choosing Invisalign over traditional metal braces. For example, by mid-2016, most orthodontic cases could use the product.
Although the adult orthodontic market is fairly large, Align may soon find it challenging to continue to dominate the market with a sustained high growth rate. Fortunately, Align has since expanded its services to help younger patients, such as children, teens, and adult patients. They are also seeking to address every issue in orthodonture, including extreme cases that may now require corrective surgery. As a result, Jeffrey D. Johnson, a senior research analyst at Robert W. Baird & Co., a medical technology group, believes that Align is poised for continued growth because of its unique materials and ability to “put them on the cusp of mass adoption.”
Align Technology stock risks also revolve around concerns about competition. In recent years, ALGN has faced an influx of competition that includes things from more affordable alternatives to patent infringement cases.
Align Technology and 3Shape
In December 2018, Align asserted a total of 35 patents against 3Shape, a provider of 3-D scanners and CAD/CAM software solutions for the dental industry. On April 26th, 2019, an Administrative Law Judge (ALJ) with the United States International Trade Commission (ITC) issued an Initial Determination that stated that the ALJ declined to find a Section 337 violation. Nonetheless, Align still has three ITC cases and six Federal District Court patent infringement cases pending against 3Shape.
Align Technology and Smile Direct Club
Align also faced some negative sentiment when an arbitration ruling found Align Technology in violation of non-compete and other restrictive covenants with its rival Smile Direct Club. This ruling required Align to close down all of its 12 Invisalign stores by April 3rd, 2019 and extended the non-compete provision, barring any new stores as well as other services until August 18th, 2022. Furthermore, Align was ordered to return its ownership stake to Smile Direct Club and will no longer be an investor.
Align Technology and ClearCorrect Inc.
After 14 years in patent litigation, Align Technology and ClearCorrect reached a settlement in March 2019. Align would receive a $35 million payment and a five-year agreement with the Straumann Group, which obtained ClearCorrect in 2017. This agreement integrates Align’s scanners into the Straumann’s network.
It is worth noting that Align Technology’s stock prices rose 5 percent the next day as investors reacted to the news.
Despite numerous patent clashes, Roger George, Align senior vice president and general counsel, said, “We remain committed in technologies and products that help our customers and their patients, and to preventing the unauthorized use of our intellectual property.”
Analysts are optimistic about Align’s performance, as it has delivered robust earnings reports every quarter thus far. Wall Street predicts that Align’s earnings growth will likely slow to 11.6 percent year over year as the company targets international opportunities and continues to fend off rivals. After this year of transition, Align Technology’s earnings growth will likely accelerate to 30.2 percent next year, making Align Technology stock very attractive.
Align Technology Stock Price
After Align released its strong first-quarter results, the Align Technology stock jumped 14.2 percent in April. With its current price of $283.32 at the beginning of June, we are looking at a 40 percent increase from the beginning of 2019.
Additionally, on April 18th, 2019, investment analysts at Guggenheim began coverage on Align Technology stock. The firm set a “buy” rating and a $335 price target, suggesting a potential rise of 19.01 percent from the stock’s current price. This resulted in shares increasing by 2.9 percent, directly follow Guggenheim’s news.
ALGN has also been the topic of several other research reports. For example, BidaskClub, an adaptive algorithm, upgraded its rating of Align Technology stock from “hold” to “buy.” In general, there seems to be an overall consensus to “buy” ALGN with a consensus price target of approximately $334.28.
With the combination of sound business practices and an in demand product, Align Technology has positioned itself to be a profitable security. Despite its challenges, ALGN continues to regain market sentiment and pull in strong quarterly earnings time and time again. Now may be the right time for you to pay special attention to this asset when picking your stocks for day trading.