After reporting blowout first quarter earnings after the market closed on April 28, Align Technology (NASDAQ:ALGN) stock took a sharp break to the upside on higher-than-average volume in early trading. But ALGN stock is giving up those gains on what I can only believe is investors looking to take profits.
The same pattern emerged after the company last reported earnings in February. At that time, ALGN stock dropped 20% before starting its recent climb. Is a similar pattern emerging? It could be. Short interest has been rising in the last month.
This means you may not want to jump on ALGN stock at this moment. However you should look for an advantageous price point to buy the dip.
A Pandemic Winner
Align Technology was a big winner in the pandemic as consumers looked to update their look in a world where video conferencing became the new normal. And with traditional orthodontic options unavailable, it gave Align (and its invisalign technology) a catalyst for growth.
Align Technology CEO Joe Hogan refers to this as an “orthodontic revolution.” Part of this stems from the simplicity of the product. Patients can wear the clear aligners without concerns of them being visible to others.
And the growth is not just occurring in the United States. According to Hogan, the company’s growth is “deep and wide.” Hogan specifically pointed to growth in markets such as Europe, Japan and China.
For the full year, Align management expects $3.7 to $3.9 billion in net sales with the majority of that coming in the second half of the year. Analysts were forecasting $3.49 in sales.
The Global Teledentistry Market Report projects the market to reach a $2.6 billion valuation by 2027 with a compound annual growth rate (CAGR) of 17.1%.
A Doctor-Driven Model
Investors looking to invest in ALGN stock may also be looking at a company like SmileDirectClub (NASDAQ:SDC). SDC stock sells for less than $20 per share and may be considered a better buy as the “underdog” in what is largely seen as a duopoly.
But that’s not the right way to look at these two companies. Align Technology is not competing with traditional orthodontistry. In fact, the company’s model relies on orthodontists and, in simpler cases, dentists to use their technology. The company’s technology can help build a larger client base for these professionals because patients come into the office requesting it.
That’s different from the SDC model which is direct-to-consumer. I wrote about SmileDirectClub once during the pandemic and once earlier this year. And the same reason I liked SDC stock last year is what has me favoring ALGN right now.
Adding fule to that argumenti is A survey by Dentisty Today found that 72% of dental practices did not offer teledentistry in 2020. However the same survey reported that 23% are planning to offer teledentistry in 2021.
Simply put, many patients are not looking to cut their orthodontist out of this process, they’re looking to work collaboratively. That’s an opportunity better suited to what Align Technology offers.
Is Align Giving a Sell Signal?
Analysts love the stock. Five analysts have boosted their price target since the announcement and all five have a price target of over $700.
However, Align management did note that they were planning on purchasing $100 million of its common stock either via open market repurchases or through an accelerated stock repurchase agreement. This would take place on or prior to May 3, 2021.
With that in mind, the stock may have further to fall. However, investors should still be on the lookout to buy ALGN stock after this selloff is complete. After that though, ALGN stock looks to have plenty of upside for investors.
Before you consider Align Technology, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Align Technology wasn't on the list.
While Align Technology currently has a "Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
View The 5 Stocks Here
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist