Align Technology Shares Hurt by Macro Issues, Decline in ASPs

For Align Technology ALGN, we remain concerned about the current economic uncertainty, which continues to cast a negative impact on the company’s dental procedures. The competitive landscape also remains an overhang. The stock carries a Zacks Rank #4 (Sell) currently.Factors Dragging ALGN Shares DownIn recent times, Align Technology has faced a decline in Invisalign's average selling price (ASP) for comprehensive treatment options. This resulted in a decrease in the company’s revenues. In the second quarter, in particular, the company faced a sequential decline in ASP, primarily reflecting higher discounts and an unfavorable product mix shift to lower ASP products. On a year-over-year basis, the decrease in non-comprehensive ASPs reflected higher discounts, a product mix shift to lower ASP products and an unfavorable impact of a price adjustment in the U.K. to make the recently mandatory application of VAT to clear aligner prices.In the third quarter of 2024, Clear Aligner ASPs were down, reflecting the impact of unfavorable foreign exchange of 1.5%, a 20% price reduction in the United Kingdom to offset a 2024 ruling by the U.K. tax authorities in the first quarter of 2024, product mix shift to lower-priced products, geographic mix and higher discounts.The ongoing industry-wide trend of staffing shortages and supply chain-related hazards have been denting revenues and margins for Align Technology. Deteriorating international trade, with global inflationary pressure leading to a tough situation related to raw material and labor cost as well as freight charges, and higher interest rate have put the dental treatment space (which is highly-elective) in a tight spot. In the third quarter, Align Technology’s revenues were dented in part due to more pronounced seasonality for Clear Aligners than expected, as well as continued weak consumer sentiment and a soft dental market, especially in the United States.We anticipate increasing headwinds from macroeconomic uncertainty and potential supply issues related to the war in the Middle East in the upcoming period too. In the third quarter, the company’s operating margin contracted 72 basis points (bps) year over year as a result of these.Align Technology, Inc. Price Align Technology, Inc. price | Align Technology, Inc. QuoteMeanwhile, foreign exchange is a major headwind for Align Technology due to a considerable percentage of its revenues coming from outside the United States (in 2023, 44% of the company’s consolidated revenues came from international regions). During the third quarter of 2024, Clear Aligner revenues were down 1%, primarily due to lower ASPs. Further, in the third quarter, lower scanner ASPs resulted in a sequential decline in Systems and Services revenues. From time to time, Clear Aligner ASP has been significantly impacted by unfavorable foreign exchange across multiple currencies, especially the Japanese yen, euro, and Brazilian real.Over the past year, shares of ALGN have declined 19.3% against the industry’s 3.4% growth. With the company continuing to face supply issues as well as ASP-related pressures and with no major reversal expected anytime soon, considering the complicated geopolitical situation worldwide, we expect the stock trend to remain gloomy in the coming days.Factors Favoring ALGNAlign Technology is strategically capturing the growing market of malocclusion, one of the most prevalent clinical dental conditions in the world. According to Align Technology’s March 2024 data, it currently affects approximately 60% to 75% of the global population. The company estimates that there are approximately 600 million people globally with malocclusion. However, most of them do not seek orthodontic treatment mainly due to negative perceptions of metal braces, affordability of treatment and accessibility to doctors in certain markets and geographies.Annually, only 22 million people globally elect treatment by orthodontists, which means that a large portion of the patient base is unattended. The company also noticed that almost all of this patient base could be treated with Invisalign Clear Aligner. This represents a significant growth opportunity for Align Technology to increase its share of the existing global market of orthodontic case starts, especially among teens, and expand the market for digital orthodontics, especially among adults.Among the recent developments, Align Technology continues to receive positive feedback for Invisalign Palatal Expander System. Through the third quarter of 2024, Align Technology successfully continued to commercialize this device. In October, the company announced  Palatal Expander System’s commercial availability in Singapore and expects to extend the availability of the transformative Invisalign Palatal Expander System to even more doctors and their patients in markets across the Asia Pacific region. Further, the company is gaining in terms of strong adoption of Vivera retainers ordered through Doctor Subscription Program (DSP), as well as clinical training and education accessories in eCommerce.Key PicksSome better-ranked stocks in the broader medical space are Veracyte VCYT, ResMed RMD and Omnicell OMCL.Veracyte, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated earnings growth rate of 65.8% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.VCYT’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 520.58%. Veracyte’s shares have risen 49.2% in the past year compared with the industry’s 5.5% growth.ResMed, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 21.1% for 2025. RMD’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.41%. Its shares have risen 34.1% compared with the industry’s 7.7% growth in the past year.Omnicell, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 72.7% for fourth-quarter 2024. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 121.74%. OMCL’s shares have risen 26.4% against the industry’s 15.7% decline in the past year.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Align Technology, Inc. (ALGN): Free Stock Analysis Report Omnicell, Inc. (OMCL): Free Stock Analysis Report ResMed Inc. (RMD): Free Stock Analysis Report Veracyte, Inc. (VCYT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks