The stock of medical device company Align Technology (NASDAQ:ALGN) plunged about 26% in yesterday’s extended trading session in reaction to weak third-quarter results and revenue guidance cut. The company’s performance was impacted by subdued demand and forex headwinds.
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Q3 adjusted EPS of $2.14 missed analysts’ expectations of $2.26. The figure, however, compares favorably with the $1.63 EPS reported in last year’s quarter. Meanwhile, revenue increased 7.9% year-over-year to $960.2 million but remained below the consensus estimate of $994.48 million. During the quarter, Clear Aligner revenue was $794.9 million (up 8.5%), while Imaging Systems and CAD/CAM Services revenue increased 4.9% year-over-year to $165.3 million.
Strong momentum in Invisalign First led to a 2.3% year-over-year increase in Clear Aligner volume to 602,300 cases. In particular, demand was strong among teenagers and younger patients.
Regarding the repurchase of its common stock, ALGN plans to buy back up to $250 million in Q4 2023 through open market repurchases or an accelerated stock repurchase agreement.
Q4 and Full-Year 2023 Outlook
Looking ahead, for the full year 2023, the company sees top-line ranging between $3.83 billion and $3.85 billion, compared with its prior guidance of $3.97 billion to $3.99 billion.
Further, revenue for the fourth quarter is expected to be between $920 million and $940 million, indicating a 12% year-over-year growth at the midpoint. Align expects revenues from both Clear Aligner business and Systems and Services to be sequentially lower. This is based on expectations of fewer orthodontic cases, currency headwinds, and longer sales cycles for capital equipment purchases.
Is ALGN a Buy or Sell?
The recent pullback in Align stock represents an impressive buying opportunity for investors. The company’s strong position in the dental care industry, solid financials, and robust marketing strategies make it a good pick. However, macro pressures could weigh on the near-term performance.
Overall, the stock has a Moderate Buy consensus rating based on nine Buy, one Hold, and one Sell rating. The average ALGN stock price forecast of $376.67 implies an upside potential of 48.5% from the current level.
