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Stifel reduces Align Technology shares target, noting limited downside despite weaker Q3 performance

EditorAhmed Abdulazez Abdulkadir
Published 24-10-2024, 07:32 pm
ALGN
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On Thursday, Stifel adjusted its outlook on Align Technology (NASDAQ:ALGN), reducing the price target to $275 from $285, while keeping a Buy rating on the stock. The adjustment follows the company's third-quarter financial performance, which aligned with the expectations previously set by the analyst's survey.

The report highlighted Systems & Services sales, bolstered by the Lumina product, as a positive aspect, despite a softer performance in U.S. case numbers and worldwide average selling prices (ASPs) that were slightly below projections.

Align Technology's management has revised its year-over-year revenue growth guidance for 2024 to approximately 4%, a slight decrease from the previously forecasted range of 4-6%.

This revision aligns with the analyst's recent projection of a 4.3% increase. Looking ahead to 2025, it is anticipated that consensus estimates will align with the firm's forecast of mid-single-digit percentage growth year-over-year, which would equate to around $4.2 billion in revenue.

However, earnings per share (EPS) estimates may not see significant changes as Align Technology is set to implement a restructuring program aimed at operational margin expansion in 2025.

The stock's performance was noted to be weak leading up to the earnings release. However, with the stock trading at approximately 20 times the firm's 2025 EPS estimate, the analyst suggests that further downside may be limited. The report indicates that a rebound in the stock's trajectory will likely require positive revisions to revenue and earnings forecasts or an improvement in consumer sentiment.

In summary, despite a downward revision in revenue growth guidance and a reduction in the price target, Stifel maintains a positive outlook on Align Technology shares, underscored by the anticipated benefits of the company's restructuring efforts and potential shifts in market conditions.

In other recent news, Align Technology has been in the spotlight following its third-quarter earnings release and subsequent analyst commentary. Piper Sandler adjusted its outlook on Align Technology, lowering the price target to $275 from $285, but maintained an Overweight rating on the stock. This adjustment came after the company's third-quarter results, which fell short of consensus expectations regarding clear aligner volumes and revenue.

Align Technology reported a modest year-over-year revenue increase of 1.8% to $978 million, slightly below expectations. Clear Aligner volumes grew by 2.5% to 617,000, with significant expansion in international markets, offsetting a decline in U.S. volumes. Despite these figures, the company remains hopeful about its growth prospects, particularly in international markets.

The company has also announced restructuring efforts, including layoffs, aimed at improving future margins. Align Technology projects Q4 2024 revenues to be between $995 million and $1,015 million, with an increase in Clear Aligner volumes. These recent developments underline the company's strategic efforts to maintain profitability into 2025, despite current economic headwinds and softer consumer demand.

InvestingPro Insights

To complement Stifel's analysis of Align Technology (NASDAQ:ALGN), recent data from InvestingPro offers additional context for investors. As of the last twelve months ending Q2 2024, Align's revenue stood at $3.94 billion, with a modest growth of 5.5%. This aligns with the company's revised guidance and Stifel's projections for 2024.

InvestingPro Tips highlight that Align has been aggressively buying back shares, which could potentially support earnings per share as the company implements its restructuring program. Additionally, the stock is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.77, suggesting potential undervaluation despite recent price declines.

However, investors should note that ALGN's stock price has been quite volatile, with a 16.61% decline over the past month. This volatility underscores Stifel's observation about the stock's weak performance leading up to earnings.

For those seeking a deeper dive into Align Technology's financials and market position, InvestingPro offers 11 additional tips, providing a more comprehensive view of the company's prospects.

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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