Stifel maintains Buy on Align Technology, price target at $275

Friday’s trading session saw Stifel analysts reiterate a Buy rating for Align Technology (NASDAQ:ALGN) with a steady price target of $275.00. The firm highlighted several positive aspects from Align’s annual report. Notably, the significant role of Lumina upgrades contributing to the company’s solid year-over-year revenue growth of 16%. Additionally, foreign exchange rates are currently favorable, aligning with the company’s financial outlook for 2025. Efficient allocation of advertising expenditures in 2024 and an acceleration in the growth of active Invisalign doctors were also underscored as positive indicators. According to InvestingPro data, the company maintains strong profitability with a 70% gross margin and healthy returns on equity of 11%.

On the downside, a larger portion of Align’s 2024 sales stemmed from deferred revenue. There was also an uptick in promotional spending, especially outside the United States, which has impacted the average selling price. Furthermore, days sales outstanding (DSOs) have continued to rise, indicating a longer time to collect revenue post-sale. InvestingPro analysis reveals that despite these challenges, the company operates with minimal debt, with a debt-to-equity ratio of just 0.03.

Stifel also offered additional insights, noting that despite recent poor consumer sentiment readings, including declines in the Michigan Consumer Sentiment and Consumer Confidence Index, Invisalign’s Google (NASDAQ:GOOGL) Trends data remains strong both in the United States and globally. The analysts expressed their view that the recent drop in Align’s stock price may be an overreaction to expectations of a weaker first quarter in 2025 and concerns over the company’s ability to meet its full-year guidance.

The Stifel report concludes with an observation that Align’s stock is currently trading at a multiple roughly equivalent to Patterson’s acquisition multiple, approximately 10.5 times the next twelve months’ estimated EBITDA. Despite the mixed financial indicators and market sentiment, Stifel’s position remains optimistic, advocating for investment in Align amidst the recent market pullback.

In other recent news, Align Technology has announced its plan to complete a $1 billion stock repurchase program, with $225 million set for purchase in the open market. This decision underscores the company’s strong financial position and commitment to shareholder value. Align Technology also introduced Align X-ray Insights, an AI-driven dental diagnostic tool, in the European Union and the United Kingdom (TADAWUL:4280), aiming to enhance diagnostic accuracy and patient care. This new software is part of the Align Digital Platform and has received regulatory clearance in several regions, including Europe and the UK.

Additionally, Wells Fargo (NYSE:WFC) initiated coverage on Align Technology with an Overweight rating, reflecting confidence in the company’s market leadership in clear dental aligners. The firm highlighted Align’s significant brand recognition and competitive advantage in the industry. Piper Sandler, on the other hand, adjusted its price target for Align Technology from $275 to $270, maintaining an Overweight rating. This followed the company’s fourth-quarter earnings report, which met Wall Street expectations.

Stifel analysts have expressed confidence in Cooper Companies and Envista within the Med-Tech sector, noting their potential to meet fiscal year 2025 guidance. They recommend a portfolio allocation including these companies, as well as Align Technology and Elanco, to capitalize on future growth opportunities. These developments reflect Align Technology’s strategic initiatives and the broader industry dynamics impacting investor decisions.

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