Align Technology, Inc. ALGN 2.98%, a maker of orthodontic products to fix crooked teeth and other issues, has seen a stock gain of more than 130% since March and has “gotten ahead of itself,” according to BofA Securities.
The company is set to report second-quarter results Wednesday.
The Analyst: Michael Ryskin downgraded Align Technology from Neutral to Underperform with a price target lifted from $230 to $280.
The Thesis: Align’s stock has more than doubled since its March lows and is up 15% for the year, as investors appear to be buying into the company’s long-term potential to take market share from traditional braces, Ryskin said in a Monday downgrade note.
The stock is now trading at a premium valuation on a P/S and P/E basis at a time when the company will experience continued pressure for the next few quarters, the analyst said.
A BofA Securities survey of 40 U.S. orthodontists points to a slowdown in second-quarter total case volume at negative 55%, as many offices were forced to close amid the pandemic, he said.
The company could see the impact of low patient volumes through parts of 2021, Ryskin said.
The survey indicated a longer-term trend toward clear aligners — but risks of a second wave, ongoing or sustained lockdowns and economic concerns are “more likely to hamper” Align Technology’s business before it can take advantage of any momentum, the analyst said.
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