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On Thursday, Stifel analysts maintained their Buy rating and $275.00 price target for Align Technology (NASDAQ:ALGN) shares, representing significant upside from the current price of $169.65. According to InvestingPro data, analysts generally share this optimistic outlook, with price targets ranging from $150 to $295. The firm’s analysts highlighted the recent financial results of Angelalign, which suggest a stabilization in the market share of Align Technology’s Invisalign product, particularly in the competitive Chinese market.
The analysis by Stifel noted that Angelalign’s second half of 2024 (2H24) year-over-year worldwide case volume growth was 38%, significantly outpacing Invisalign’s growth of 4%. This growth was attributed to Angelalign’s expansion outside of China. Despite competitive pressures, InvestingPro analysis shows Align maintains strong financial health with a "GOOD" overall score and impressive gross margins of 70%. The rate of Invisalign’s share losses globally has shown signs of stabilization. In the second half of 2024, Invisalign’s share loss was 3.4 percentage points, consistent with the first half of the year’s 3.2 percentage points, and showing no further acceleration.
Specifically, in China, Angelalign’s case volume growth slowed down, with a 2% year-over-year decrease in 2H24, compared to a 11% increase in the first half of 2024 and a 15% increase in the full year of 2023. This deceleration in growth for Angelalign coincides with Invisalign gaining 2 percentage points of market share in China during the second half of 2024, marking its first sequential share gain in the region since the first half of 2021.
Stifel’s report also addressed concerns regarding Angelalign’s expansion efforts outside of China. Although Angelalign experienced a half-over-half increase of 25,500 cases in 2H24, this was a deceleration from the 34,000 case increase in the first half of the year compared to the second half of 2023. The firm suggests that Angelalign’s pricing strategy, which is competitive, may be impacting their gross margins and could prove unsustainable in the long run.
Finally, the firm observed an improvement in Angelalign’s operating margins (OMs) for its expansion efforts outside of China, from -50% in the first half of 2024 to an implied -28% in the second half of the year. Additionally, year-over-year incremental margins turned slightly positive at an estimated 8%, compared to a -12% in the first half of 2024. This financial performance supports Stifel’s positive outlook on Align Technology’s stock. The company’s strong fundamentals are reflected in its return on invested capital of 12% and healthy free cash flow yield of 5%. For deeper insights into Align Technology’s financial health and growth prospects, including exclusive ProTips and comprehensive valuation analysis, visit InvestingPro.
In other recent news, Align Technology has reported a significant development by announcing its plan to purchase $225 million of its common stock in the open market, completing its $1 billion stock repurchase program. This move highlights the company’s strong financial position and commitment to enhancing shareholder value. Additionally, Align Technology has introduced a new AI dental diagnostic tool, Align X-ray Insights, in the European Union and the United Kingdom (TADAWUL:4280), which aims to improve diagnostic accuracy and patient care. The tool, part of the Align Digital Platform, has received positive feedback from early users for enhancing patient communication and treatment acceptance.
In terms of analyst activity, Piper Sandler recently adjusted their outlook on Align Technology, reducing the stock’s price target to $235 while maintaining a Neutral rating, citing a decline in aligner volumes influenced by weather conditions. Conversely, Stifel maintains a Buy rating on Align Technology with a price target of $275, noting strong year-over-year revenue growth and favorable foreign exchange rates. Stifel also sees Align as a viable investment despite mixed financial indicators and market sentiment, suggesting it as part of a diversified portfolio. These developments reflect the mixed signals in the dental and consumer markets affecting Align Technology’s recent performance.
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