'Climbing The Wall Of Worry' At Align Technology

In a report published Tuesday, Morgan Stanley analysts upgraded the rating on Align Technology, Inc. ALGN to Overweight, while raising the price target from $56 to $79. The upgrade comes in the wake of revenue reacceleration and fading concerns about IP expirations. Align Technology's growth prospects are expected to be driven by the company's collaboration with Sirona, increased digitization of dental offices and enhanced international penetration. Although the company's revenue and EPS growth is expected to moderate in 2015 due to forex pressures, Align Technology is estimated to record 15 percent revenue CAGR and 20 percent EPS CAGR over the next 5 years. The analysts believe that investor concerns over the impact of IP expirations and CEO transition on Align Technology's performance are inflated. "We expect ALGN to exceed consensus growth expectations in the near-term, alleviating this concern," the analysts added. In the report Morgan Stanley noted, "We believe customer base expansion and digitization will grow both top-line and bottom-line results, and more than offset expected volume and price declines resulting from the entrance of competitors upon patent expirations relative to expectations." Increasing reliance of ALGN SIRO software and hardware is expected to boost Align Technology's position and make the entry of newer players difficult. Also the company's international base is all set to expand due to increased digital dentistry penetration. The analysts expect Align Technology's international mix to grow from 30 percent of volumes in 2015 to 46 percent of volumes by 2020.