Align Technology, Inc. ALGN, 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. (See his track record here.)
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.
ALIGN Price Action: Shares of Align Technology were trading lower by 3.1% at $312.31 at the time of publication. Monday
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