Stifel Reiterates Buy Rating on Align Technology (ALGN)

Stifel analyst Jonathan Block reiterated a Buy rating and $275.00 price target on Align Technology (NASDAQ: ALGN).

The analyst comments "Angelalign reported FY24 results this morning, and our main takeaway relates to Align Technology, where we believe Angel’s 2H24 implied case volume results support our view that the rate of Invisalign share losses globally (and seemingly most notably in China) are abating. Our full takeaways with share-specific metrics can be found below. Angel’s 2H24 y/y worldwide case volume growth of +38% did well-exceed Invisalign growth of +4%, driven by strong incremental growth from ex-China expansion that remains in the fairly early innings. However, when we look at TTM global case volume share of Align versus Angel on a duopoly basis, we see that Invisalign's share losses of 3.4pts in 2H24 was at a similar rate to 1H24’s 3.2pts of share—importantly, this to us is an initial sign of Invisalign share stabilization after share losses were accelerating over the prior ~24 months (0.4pts in 2H22, 1.1pts in 1H23, 2.1pts in 2H23, and then 3.2pts in 1H24). Please see first table below. When we zero in on China, Angel’s 2H24 case volume growth of -2% y/y was a reversal from 1H24’s +11% and FY23’s +15%. Again, more importantly for Align, our analysis of China duopoly share on a TTM case volume basis shows that 2H24 saw Invisalign China gain 2pts of share versus Angel—and this would represent Align’s first sequential share gain in China since 1H21. A concern among ALGN investors has been what Angel’s ex-China expansion could mean for Invisalign, but we were not overly impressed with Angel’s 2H24 case volume of 83,100. This represented an h/h increase of 25,500 cases from 1H24 which, while strong, was a deceleration from the 34,000 case volume increase in 1H24 versus 2H23. We do acknowledge seasonality may be somewhat at play, as we believe Angel’s ex-China volume is overweight Europe, which typically sees substantial softness in 3Q specifically. The profitability of Angel’s ex-China expansion efforts are a watchpoint (for us)—currently, we believe the company is competing on price, which naturally is compressing their (gross) margins… and several clear aligner competitors to Align historically have shown that undercutting Invisalign on price is not a durable strategy when trying to ultimately run a sustainable clear aligner business. For Angel, 2H24 saw improvement in ex-China OMs, increasing from -50% in 1H24 to an implied -28% in 2H24; additionally, incremental y/y margin also flipped slightly positive (8% by our estimate) versus -12% in 1H24."

For an analyst ratings summary and ratings history on Align Technology click here. For more ratings news on Align Technology click here.

Shares of Align Technology closed at $166.14 yesterday.

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